Housing starts fell 2.6% MoM (-19.8% YoY) in August to a 12 year low of 1.33 million annualized. Building permits, an indication of future construction, fell an even larger -5.9% MoM, indicating that a recovery in the housing market is not imminent. In addition, the figures for housing starts and permits were revised lower in July, making the cumulative two month decline even steeper.
Single family home starts plunged -7.1% MoM (-27.6% YoY) to the lowest level since 1993. Conversely, multi-family starts, which include apartments, rose 13% MoM (+16.7% YoY). Homes remaining under construction fell -1.2% MoM (-15.8% YoY), and the number of houses completed during August fell -.2% MoM (-19.3% YoY).
Regionally, the Northeast saw the largest drop in starts, falling by 38% MoM, representing the largest monthly drop since 1990 when the area was last in a housing recession. The West also saw a large decline of -18% MoM. But, housing starts actually rose +11% MoM in the South and +4.2% in the Midwest.
Demand for new homes is likely to remain subdued as credit tightens and mortgage defaults for existing homes continues to rise. Builders remain pessimistic as the NAHB survey settles at record lows. GDP growth will be restricted by the continuing decline in home construction.
Last weekend's home sale by Hovnanian, with discounts of up to $100k on new homes, saw 1,700 new contracts signed and an additional 400 houses having deposits placed on them. The president of the company commented yesterday that he is seeing a "more rapid descent" in the housing market recently.
Wednesday, September 19, 2007
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