Housing starts dropped in November, and permits for future construction slid to a 14-year low, according to a report released Tuesday by the Department of Commerce and the Department of Housing and Urban Development (HUD).
Housing starts declined 3.7 percent to a seasonally adjusted rate of 1.187 million units, after rising 4.2 percent to 1.232 million in the previous month. Single-family housing starts dropped 5.4 percent to 829,000, the lowest level since April 1991.
Year-to-year, overall housing starts for November declined 24.2 percent.
What's more, as a measure of future prospects, building permits dropped 1.5 percent to an annual rate of 1.152 million , the lowest level since June 1993.
According to Brian Catalde, president of the National Association of Home Builders (NAHB), scaling back on housing starts is the right remedy for the housing sector's current conditions.
"Builders are doing exactly the right thing by slowing production and allowing demand for new homes to catch up with supply," said Catalde. "Working down the inventory of unsold homes is key to returning the housing market to greater health and balance."
NAHB chief economist David Seiders echoed those sentiments.
"Today's report is consistent with what single-family builders have reported in our recent surveys, and is very much in line with our expectations," Seiders said. "It's no surprise that builders are starting fewer homes and pulling fewer permits for new home construction at a time when home buyer demand is weak and there's a heavy supply of vacant homes on the market. We expect the supply-demand balance to improve during the early part of 2008, supporting the early stages of recovery in starts and permits during the second half of next year."
Although starts and permits exceeded the expectations of most industry experts, Carl Reichardt, a Wachovia Capital Markets senior equity research analyst, said in a note to investors that with builders "compressing lot supply through land sales, mothballed communities, and monetized lots in-process, we expect spec starts to erode relatively sharply in the next six to 12 months as builders hope for business to rebound."
On a regional basis, housing starts fell 16.3 percent in the Northeast, 1.5 percent in the Midwest, and 6.9 percent in the West. Starts rose 0.3 percent in the South.