The housing industry won’t be on the upswing anytime soon.
According to data released today by the U.S. Census, overall housing starts tumbled to their lowest level ever in December with a seasonally adjusted level of 550,000. Compared to the previous month, that represents a 15.5% drop in activity; annually, it translates into a 45% fall from December 2007.
Permits, which are a crucial indicator of future construction activity, eroded even more. Overall housing permits slid 10.7% on a monthly basis to a seasonally adjusted rate of 549,000, which is 50.6% below December 2007.
Of course, single-family numbers also showed declines. Single-family starts stumbled 13.5% compared to the previous month, landing at a seasonally adjusted pace of 398,000 units. On an annual basis, that qualifies as a 48.9% reduction. Single-family permits also took a monthly hit of 12.3%, to a seasonally adjusted rate of 363,000. Compared to December 2008, that level is 49.2% lower.
The record-breaking low numbers caught many analysts by surprise, who had expected total starts and total permits to each be around 600,000 units. Instead, today’s data reminded many just how difficult the current market is for builders, who are fighting to compete with foreclosures and a glut of existing homes. “The core supply problem remains the secondary market,” noted Michael Rehaut, an analyst with JPMorgan.
But that provides little real comfort for builders, thousands of whom are meeting this week in Las Vegas at the International Builders' Show. “Conditions in the market for new homes have not been this bad since the 1930s, and they continue to worsen,” noted Patrick Newport, U.S. economist with IHS Global Insight, a research firm in Lexington, Mass.
He’s not the only one looking at 2009 . Rehaut also said “weak demand [will] continue well into 2009, driven by rising unemployment, low consumer confidence, still tight credit conditions, and rising delinquency and foreclosure rates. As a result, given the continued drop in both starts and permits, we continue to believe a trough remains elusive in the housing sector.”
Alison Rice is senior editor, online, at BUILDER magazine.