Housing starts in November fell 3.7%, and building permits dropped 1.5%, both from revised October rates, the Commerce Department reported this morning (Dec. 18).
The data, released jointly through the U.S. Census Bureau and the Department of Housing and Urban Development, put starts at a seasonally adjusted annual rate of 1,187,000, 3.7% below the revised October estimate of 1,232,000 and 24.2% below the revised November 2006 rate of 1,565,000. Single-family starts in November were at a rate of 829,000, 5.4% below the October figure of 876,000. The November rate for units in buildings with five units or more was 332,000.
Permits were at a seasonally adjusted annual rate of 1,152,000, 1.5% below the revised October rate of 1,170,000 and 24.6% below the revised November2006 estimate of 1,527,000. Single-family authorizations in November were at a rate of 764,000, down 5.6% below the October figure of 809,000.Authorizations of units in buildings with five units or more were at a rate of 334,000 in November.
Housing completions were at a seasonally adjusted annual rate of 1,344,000, 4.1% below the revised October estimate of 1,402,000 and 28.7% below the revised November 2006 rate of 1,885,000. Single-family housing completions in November were at a rate of 1,088,000, 4.1% below the October figure of 1,135,000. The November rate for units in buildings with five units or more was 229,000.
Regionally, on a seasonally adjusted basis, permits were down -10.5% in the Northeast; up 1.1% in the Midwest; up 7.7% in the South and down 15.1% in the West. Starts were down -16.3% in the Northeast; down 1.5% in the Midwest; up 0.3% in the South and down 6.9% in the West.
In a research note to investors, Carl Reichardt, home building analyst at Wachovia Capital Markets, said, "Both starts and permits have now declined by on a yr/yr basis for 20 consecutive months. As underscored by yesterday's (12/17) Housing Market Index (HMI) data, field sentiment among builders remains at an all-time low for the third consecutive month, and as such, we'd expect to see starts and permits continue to decline, even if sentiment lifts itself out of the dregs modestly. Moreover, 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 6-12 months as builders hope for business to rebound."
Michael Rehaut of J.P. Morgan Securities, in a similar research note, said, "While we view the decline in starts and permits as a positive for supply in the new construction market, the core problem of the overall housing market, in our view, is continued highly elevated levels of existing homes available for sale, which is 8.6x the size of new home supply and has risen 55% over the last two years...We believe today's highly elevated inventory levels will cause further significant pressure on pricing, and drive large impairment charges over the next few qtrs., pushing the emergence of a trough further out. "