Anyone who doubts home builders are cutting production capacity should look at these numbers.
According to data released today by the U.S. Census, the level of housing starts fell 18.9 percent in November, compared to the previous month, to a seasonally adjusted annual pace of 625,000. Single-family starts took a similar dive, sliding 16.9 percent last month to a seasonally adjusted annual pace of 441,000.
But it is the yearly comparisons that provide a stark picture of how much housing has contracted in the last year. Compared to November 2007, overall housing starts have plummeted 47 percent. Single-family starts have plunged 46 percent.
“This may be the worst housing report ever,” said Patrick Newport, U.S. economist with IHS Global Insight in Lexington, Mass. “Not only did housing starts, housing permits and single-family starts plunge to all-time lows, the double-digit drop in permits points to further two-digit drops in starts in December and January.”
He’s right that building permits, considered an indicator of future construction activity, look equally bleak. Total permits declined 15.6 percent on a monthly basis in November to an annually seasonally adjusted pace of 616,000; single-family permits slid 12.3 percent to a rate of 412,000. On an annual basis, these November numbers represent a 48.1 percent decline for overall permits and a 46.3 percent reduction for single-family.
And any sort of recovery looks far, far away. “In recent months, several factors that will extend the downturn in housing starts have come into play,” Newport says. “First, the household formation rate has slowed, as homeowners losing their jobs or homes to foreclosure have moved in with family. Second, rising foreclosure rates have driven down the prices of existing homes, pricing new homes out of the market. Third, the credit crunch has made it difficult for builders with viable projects to obtain financing. Finally, the severity of the downturn and the stock market crash has reduced demand for long-lasting goods such as automobiles and new first and second homes. These factors will continue to play a role in depressing starts in 2009.”
Alison Rice is senior editor, online, at BUILDER magazine.
For more information on how unemployment affects housing starts, read "Housing, Jobs Slide Together Along Current Rocky Economic Path" by BUILDER Senior Editor John Caulfield.