Wikinvest Wire

Beware the housing bottom-callers

Tuesday, March 18, 2008

A short time ago, the Commerce Department reported(.pdf) on new home construction during February - don't let that little red squiggle in the lower right fool you.
The apparent "stability" over the last few months in housing starts is not only dwarfed by the standard error of plus or minus 11+ percent, but its support is now dominated by multi-family home starts - construction of single-family homes is still in a serious funk.

Rex Nutting at MarketWatch reports on the details:

Single-family housing starts sink to 17-year low
Building permits drop 7.8%, biggest decline in 13 years

With no end in sight to the housing bust, new construction on single-family homes dropped by 6.7% in February to a seasonally adjusted annual rate of 707,000, the lowest in 17 years.
Building permits, a leading indicator of construction, fell 7.8% in February to a seasonally adjusted annual rate of 978,000, the lowest since the autumn of 1991. It was the biggest monthly decline in 13 years.

Permits for single-family homes dropped 6.2% in February to a 639,000 annual pace, a 17-year low.

The report confirms that home building remains extremely weak, with home prices falling and sales tumbling.

In the past year, housing starts are down 28.4%. Single-family starts are down 40.5%. Building permits are down 36.5% in the past year, while single-family permits are down 41.9%, the biggest drop in 26 years.
Starts of multifamily units rose 14.5% in February, continuing a boom in apartment building. Multifamily starts are up 23% in the past year.
Beware of anyone who tells you that we've hit bottom for either housing or stocks.

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Kevin said...

In particular -- notice that permits are significantly lower than starts. That can't last. You can have permits that never turn into starts, so permits can run higher than starts over the long term, but starts can only be above permits for a very, very short amount of time.

Notice how rarely starts exceed permits.
Notice the action right after those cases.

GS751 said...

We are far from a bottom, I don't even wanna talk about a bottom. It all goes back to Soro's theories on reflexivity.

Anonymous said...

It would be curious to see the chart epanded beyond 2002. I thought about a million starts wass typically the floor?

Tim said...

As always, Calculated Risk has some very good long-term charts.

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