Friday, October 17, 2008
A short time ago, the Census Bureau released the September data for new home construction and, as might be expected given the recent financial crisis, the news wasn't good.
Another change of scale was required in the chart above to open up the 800,000 to 1,000,000 range (annualized) which, with the exception of the 1991 recession, is an area that hasn't been visited since the 1980s.
After precipitous declines in both July and August, housing starts and permits for new construction dropped to multi-decade lows in September.
On a year-over-year basis, housing starts are now down 31.1 percent paced by a decline of 40.4 percent in the West and 32.5 percent in the South.
Permits are down 38.4 percent from year ago levels, led by a decline of 44.4 percent in the West and 37 percent declines in the South and Midwest.
Builders are cutting back on construction at a rapid pace in an effort to help clear their unsold inventory, however, the glut of foreclosures that continues to come onto the market has made these efforts futile as distressed sales have undercut prices from home builders.
The added uncertainty surrounding the credit market crisis and the rapidly slowing economy has resulted in many buyers quickly turning from "bargain hunters" to "skittish" buyers which is likely to put even more pressure on prices as demand again wanes.
In a separate report yesterday, the National Association of Home Builders reported its index of builder confidence dropped to its lowest level since 1985.
After it appeared as though new home construction might stabilize at historically low levels over the summer, it seems that the renewed financial market crisis of the last few months has induced another leg down.