In case you’ve lost track of what the home-builders are up to, Asha Bangalore of Northern Trusts puts last week’s housing starts data in context. The bottom line? It’s the worst ever.
As Joe Weisenthal noted last week, of course, the fewer houses homebuilders build, the sooner house prices will stop plummeting. So no worries that it looks as if housing starts are headed to zero. They can’t drop below that…which means we’re closer to the trough than the peak.
Starts of new homes fell 15.5% in December to an annual rate of 550,000. The annual average of
new homes started in 2008 is 902,000, the lowest on record. Starts of new single-family homes
dropped 13.5% to an annual rate of 398,000, the lowest on record.
The peak-to-trough decline in housing starts, both total and single-family, is the largest on record
since record keeping began for these series in 1959 (see table 1). The duration of the weakness in
home construction (peak was in January 2006 – December 2008) is also the longest on record.
On a regional basis, there is a faint glimmer of hope in the Northeast because starts of new homes
rose 12.7% in December, inclusive of a nearly 18.0% increase in single-family starts. Additional
monthly gains will be necessary to confirm that home construction has turned the corner in this
part of the nation. Housing starts posted declines in the other regions of the nation. The small
2.2% drop of housing starts in the West is also noteworthy compared with double-digit declines in
the Midwest (-24.53%) and South (-22.2%).
Asha’s Northern Trust, by the way, was one of the only big banks not dumb enough to fall for the mortgage-backed securities craze. Something about having a clear-eyed economist on staff, we guess.
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