Wikinvest Wire

Housing starts clunk along the bottom

Tuesday, March 16, 2010

The Commerce Department reported(.pdf) that housing starts fell 5.9 percent in February, from a seasonally adjusted annual rate of 611,000 to 575,000, while permits for new construction dropped 1.6 percent, from 621,000 to 612,000.

Homebuilding activity has been at depressed levels for almost a year-and-a-half now as distressed sales have continued to limit demand for new construction.
IMAGE January housing starts were revised upward from 591,000 to 611,000 making the decline in February about twice as large as it would have been using originally reported data and the previously reported number of housing permits was also revised upward.

Inclement weather in parts of the country affected the February data, however, housing starts fell more in the South (down 16 percent) than in the Northeast (down 9.6 percent) during a month of record snowfall in the Northeast.

On a year-over-year basis, new home construction was up 0.2 percent while the number of permits issued rose 11.3 percent and, from the peak of homebuilding activity in 2005, housing starts are now down 73 percent with permits issued are a full 75 percent lower.

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simplesimon said...

It's hard to believe there are any housing starts at all...

I just can't understand our system where there is a large EXCESS of housing inventory and, in some cases, entire subdivisions have been razed and, yet, new homes are STILL being constructed!

Real estate is really a strange beast and the local nature of it must be the key to understanding how this is possible.

Am I missing something obvious???

Tim said...

Well, the homebuilders have businesses to run and, while some of them could just mothball their whole operation for the next five years, most of them probably just want to continue at a reduced level of activity which is basically what the chart is showing. New home sales are at historically low levels that really blow away all previous lows, like the one seen in 1991.

Hal (GT) said...

There still remains a market for new homes. And indeed some homes do get torn down and rebuilt. But like Tim notes the businesses probably continue to operate right now at a reduced level.

Anonymous said...

If there are too many homes in Florida, that doesn't solve the housing shortage another part of the country. BTW, there are not too many homes, there are too many over priced McMansions. There is a serious shortage of affordable small homes.

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