Wednesday, September 19, 2007

U.S. Housing Starts, Permits at 12 Year Low

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In a backwards way this is good news. So much supply on the market, and if builders would ever slow down in a massive way, we could work off this oversupply once prices fell enough. But these are pretty minor drops in my opinion. And remember, Ben solved this problem yesterday so this is all 'old news' and 'taken care of' - party on.... even though even with 0% rates, many homes in the top 15 cities in America are unaffordable to people with normal jobs.

Article from CBSMarketwatch:
  • Housing starts and permits both fell to 12-year lows in August, adding to gloomy sentiment about the already-weak U.S. housing market, the Commerce Department reported Wednesday.

  • Starts of new homes fell by 2.6% to a seasonally adjusted annual rate of 1.331 million, which was the lowest since June 1995.
  • Authorized building permits, meanwhile, fell by 5.9% to a seasonally adjusted annual rate of 1.307 million, also the lowest since June 1995.
  • Both starts and permits fared worse than analysts were expecting.
  • Single-family home-building was even worse than the overall number, the data show. In August, single-family home starts dropped by 7.1% to an annual rate of 988,000, a 14-year low.
  • Permits fell 8.1% to an annual rate of 926,000, a 12-year low.
  • In the past year, overall housing starts are down 19.1% while permits have fallen 24.5%
  • "The housing crisis continues to worsen, at an accelerating rate," said Ian Shepherdson of High Frequency Economics, in an email.
  • Looking ahead, economist Patrick Newport of Global Insight said the housing downturn "is likely to take a turn for the worse" in the second half of the year due to the turmoil in financial markets.
  • On Tuesday, the National Association of Home Builders reported that U.S. home builders are as pessimistic as they have ever been over the past 22 years.
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As with all government statistics, take it with a grain of salt - however when the National Association of Home Builders sees 22 year low confidence levels - you have to think about that. But again, to me this is constructive - it means reality is finally hitting. Now we have a major slowdown in building - we have homebuilders dropping prices 100K+ on weekend sales - all this can eventually make inventory work off. The last leg to fall will be the actual home owners who need to see what the builders are finally seeing. And for the 28th time in the past 2 years I believe the Hovnanian (HOV) CEO can say 'this is the bottom' - he might be right in about 18 months.

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