housing starts: 17 year low...
Posted by
x (aka dmuck)
Oct 17 '08, 06:22
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Home construction took its third tumble in a row during September, falling to the lowest level in 17 years, and a sign points to further decline in the fourth quarter.
Housing starts decreased 6.3% to a seasonally adjusted 817,000 annual rate, after falling 8.1% in August to 872,000, the Commerce Department said Friday. Originally, Commerce reported August starts 6.2% lower at 895,000. July starts plunged 12.9%.
The September decrease was bigger than Wall Street expected. Economists surveyed by Dow Jones Newswires forecast a 1.7% drop to an annual rate of 880,000. The construction level of 817,000 was the lowest since 798,000 in January 1991.
Year-over-year, housing starts were 31% below the level of construction in September 2007.
Builders are restrained by plunging sales. The latest government report on new-home sales in the U.S. showed demand in August tumbled by 11.5% to a seasonally adjusted annual rate of 460,000, the lowest pace in 17 years. Year-over-year, new-home sales were 34.5% lower than the level in August 2007. Home prices keep falling, which curtails sales. The result -- bloated inventories of unsold homes -- is depressing prices. Inventories aren't coming down fast or enough because falling prices are curtailing sales.
"The magnitude of the housing bubble was unprecedented, and the corrective process promises to be a long and painful one," MFR Inc. analyst Joshua Shapiro said Thursday. "We look for activity levels to continue to slip in the months ahead and for pricing to erode a good deal more."
Mr. Shapiro was reacting to a report that day showing builder confidence in the market dropped even more this month. The National Association of Home Builders' index for sales of new, single-family homes fell to 14 from 17 in September. The index surveys builders about sales prospects now and in the near term.
Lower mortgage rates in mid-September couldn't prop up sentiment. "Not too surprising, given all the other stresses in the financial system and the negative economic outlook," said Abiel Reinhart, a J.P. Morgan Chase economist also responding to the NAHB report. "Look for more weak readings on new-home sales and continued cuts in housing starts."
Friday's data on starts showed building permits decreased 8.3% to a 786,000 annual rate in September. Economists had expected permits down 2.0% to a rate of 840,000. August permits fell 8.5% to 857,000 and July permits tumbled 17.7%. Permits are a sign of future construction; the three consecutive drops signal home construction has further to fall.
September single-family housing starts decreased 12.0% to 544,000. Construction of housing with two or more units rose 7.5% to 273,000; within that category, groundbreakings of homes with five or more units -- or multi-family -- were 5.8% higher.
Regionally, housing starts dropped 20.9% in the Northeast and 16.8% in the West. Starts rose 0.5% in the South and 5.6% in the Midwest.
Nationwide, an estimated 71,600 houses were actually started in September, based on figures not seasonally adjusted. An estimated 66,700 building permits were issued last month, also based on unadjusted figures.
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