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Feb. 21, 2008 - January Housing Starts Down 28% From Last Year

February 21, 2008
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Privately owned housing starts in January were at a seasonally adjusted annual rate of 1,012,000, reported the U.S. Department of Commerce yesterday. This is a 27.9 percent drop from the revised January 2007 rate of 1,403,000, but a slight 0.8 percent rise from the revised December 2007 estimate of 1,004,000.

Single-family housing starts in January were at a rate of 743,000, a decline of 5.2 percent from the December figure of 784,000. The January rate for units in buildings with five units or more was 247,000.

January building permits for privately owned housing units were at a seasonally adjusted annual rate of 1,048,000 - a 33.1 percent decline from the revised January 2007 estimate of 1,566,000, and 3 percent below the revised December rate of 1,080,000.

Single-family authorizations in January were at a rate of 673,000; this is 4.1 percent below the December figure of 702,000. Authorizations of units in buildings with five units or more were at a rate of 336,000 in January.

Privately owned housing completions in January were at a seasonally adjusted annual rate of 1,351,000 - 26.2 percent below the revised January 2007 rate of 1,830,000, but 1.8 percent above the revised December estimate of 1,327,000. Single-family housing completions in January were at a rate of 1,010,000; this is 1 percent below the December figure of 1,020,000. The January rate for units in buildings with five units or more was 303,000.

Last month’s gain in starts from December was led by a 19 percent increase in the Northeast and a 12 percent rise in the Midwest. Starts declined 3 percent in the South and 6 percent in the West. Single-family housing starts in the West were the lowest since 1959, the Commerce Department said.

“Builders continue to do what they need to do to reduce the inventory of units on the market, both by limiting new production and pulling fewer permits for new homes,” said Sandy Dunn, a home builder from Point Pleasant, W.Va., and newly elected president of the National Association of Home Builders. “We’re doing our part; Congress needs to do its part as well so that housing can once again be a major engine of economic growth.”

“Single-family builders in our latest surveys have indicated that improving affordability factors and the large selection of homes on the market are helping draw more potential buyers to model homes in recent weeks,” said NAHB Chief Economist David Seiders. “However, until that increased traffic of prospective buyers translates to higher home sales and significantly lower inventories, builders are doing the responsible thing to bring supply and demand back into alignment by keeping the brakes on new construction.”

Recession Or No Recession? Housing starts are near their lowest level since 1991, a sign the deepest real-estate recession in a quarter century will continue to weigh on the economy this year, said Bloomberg.com. A glut of unsold homes, mounting foreclosures and falling prices signal the housing slump will continue to detract from growth, setting the stage for more interest-rate cuts. Federal Reserve Chairman Ben S. Bernanke last week said the Fed was ready to act in a “timely” manner to keep the expansion from faltering.

Foxbusiness.com said the prolonged decline in housing, with falling sales and weak prices, has been a major drag on the overall economy. Growth was at a near standstill in the final three months of last year, rising at an annual rate of just 0.6 percent.

Some economists believe growth in this quarter and the next will turn negative, fulfilling the classic definition of a recession. To combat the economic weakness, Congress passed a $168 billion economic stimulus package to provide tax rebates to millions of families starting this spring.

The Fed slashed its own forecast for economic growth in a new projection released Wednesday but still had no recession in its outlook, Foxbusiness.com said. The updated forecast projected the overall economy will grow between 1.3 percent to 2 percent this year, down from an October forecast when the Fed had predicted the economy would grow by a stronger 1.8 percent to 2.5 percent this year.

Materials, Appliance Demand: The decline in home construction, exacerbated by tighter credit conditions, is slowing demand for construction materials and appliances, and increasing firings at builders, lenders and retailers, noted Bloomberg.com. Falling home prices also leave consumers feeling less wealthy, slowing the spending that makes up two-thirds of the economy and threatening to push the economy into a recession.

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