Paper Economy - A US Real Estate Bubble Blog

Saturday, February 17, 2007

January's New Construction Report

Reported as showing the slowest pace of housing starts in more than nine years, yesterday’s “New Residential Construction” report seemed to have shaken Wall Streets confidence that the housing decline is in the process of stabilizing.

That is, until bullish optimists ran with the notion that this report signaled a good sign for housing as it indicated that home builders were working through inventories and reducing production.

Builders are certainly reducing production and as a consequence, divesting themselves of land options at a much more significant pace than many had expected but the pure and simple fact is that demand has fallen significantly over the past year.

There is still a glut of vacant new construction homes in the nation, by some estimates twice as many as is seen on average.

This leaves homebuilders in the predicament of having to both compete with “investors” to move their existing backlog of homes while continually re-aligning their production to stay on track with today’s reduced demand.

January’s report again shows the momentous drop-off in demand for new construction homes on a year-over-year basis in which every region registered high double-digit declines to both permits and starts.

Except for the Northeast, every other region showed over 30% declines to both permits and starts with the Northeast trailing with 20% declines.

The next few new construction reports should be very telling in that the February-March 2006 time frame was where permits and starts really started to show weakness.

Further significant declines from here on out would unequivocally indicate that the housing market has not yet stabilized.

Here are the statistics outlined in yesterday’s report:

Housing Permits

Nationally

  • Single family housing permits down 4.0% from December, down 32.6% as compared to January 2006.
Regionally

  • For the Northeast, single family housing permits up 6.3% from December, down 21.5% as compared to January 2006.
  • For the West, single family housing permits up 2.2% from December, down 34.7% as compared to January 2006.
  • For the Midwest, single family housing permits up 3.5% from December, down 34.7% as compared to January 2006.
  • For the South, single family housing permits down 10.3% from December, down 32.7% compared to January 2006.
Housing Starts

Nationally

  • Single family housing starts down 11.2% from December, down 38.9% as compared to January 2006.
Regionally

  • For the Northeast, single family housing starts up 19.3% from December, down 25.7% as compared to January 2006.
  • For the West, single family housing starts down 33.5% from December, down 47.8% as compared to January 2006.
  • For the Midwest, single family housing starts went unchanged from December, down 45.5% as compared to January 2006.
  • For the South, single family housing starts down 8.5% from December, down 35.1% as compared to January 2006.
Housing Completions

Nationally

  • Single family housing completions up 0.3% from December, down 7.5% as compared to January 2006.
Regionally

  • For the Northeast, single family housing completions up 24.6% from December, up 20.5% as compared to January 2006.
  • For the West, single family housing completions down 11.1% from December, down 26.6% as compared to January 2006.
  • For the Midwest, single family housing completions down 6.1% from December, down 24.4% as compared to January 2006.
  • For the South, single family housing completions up 3.7% from December, up 4.9% as compared to January 2006.
Keep in mind that this particular report does NOT factor in the cancellations that have been widely reported to be occurring in new construction.

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