Constructing Capitulation: January 2007

Despite unseasonably mild weather, the start of a $40 million National Association of Realtors PR campaign, a roaring stock market and a constant flow of bullish “housing has hit bottom” sentiment, January continued to show significant weakening to the nations housing market.

January gave us the following:

• NAR's Pending Home Sales report showed increasing declines to existing home sales both nationally and regionally, but most notably in the Midwest and South regions where home sale activity dropped more than 10% on a year-over-year basis.
• The Census Department’s New Residential Home Sales report showing the third worst monthly drop-off in new home sales since the housing recession began including an over 50% decline in sales in the West region.
• NAR’s Existing Home Sales report showing that for single family homes, prices have declined year-over-year in every region especially the West where the median price declined 4.4%.
• The Census Department’s New Residential Construction report showing a momentous drop-off in demand for new construction homes. On a year-over-year basis, every region registered high double-digit declines to both permits and starts.

Furthermore, the Census Department’s Construction Spending report for January again demonstrated the significant extent to which private residential construction spending is contracting.

With the weakening trend accelerating, total contraction spending fell 13% while private single family construction spending declined by a grotesque 25.6% in January.

Key Report Details:

• The seasonally adjusted annul rate of private residential construction spending has now dropped 13.5% from the peak set back in December of 2005.
• Overall private residential construction spending dropped 13% as compared to January 2006.
• Single Family residential construction spending dropped 25.6% as compared to January 2006.
• The latest 13.01% year-over-year decline is the LARGEST percentage drop in 12 years and the greatest drop to date for this year and for this cycle.

The following charts show changes to construction spending (click for larger version):

housing+bubble housing bubble realtor national+association+of+realtors NAR lereah economy recession interest+rates mortgage loan ARM lenders bernenke greenspan

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