Wednesday, April 16, 2008

Housing Starts fall 11.9% in March

According to today's Census Bureau release:

Privately-owned housing starts in March were at a seasonally adjusted annual rate of 947,000. This is 11.9 percent (±11.6%) below the revised February estimate of 1,075,000 and is 36.5 percent (±5.2%) below the revised March 2007 rate of 1,491,000.

Single-family housing starts in March were at a rate of 680,000; this is 5.7 percent (±11.1%)* below the February figure of 721,000. The March rate for units in buildings with five units or more was 247,000.
The headline is pretty ugly. 11.9% fall in March. The chart above is even uglier. The total housing starts series goes back to 1959. The highest monthly figure is 1,837,000 starts in January 2006. That number has declined 63% to the current run rate of 680,000 annual housing starts.

The lowest figure since 1959 was 523,000 and that occurred in October of 1981 as Volcker was busy jacking up interest rates well into the teens to combat inflation. We're not all that far from a new record low.

This is actually good news. We have a huge oversupply of housing currently, and the only way to stabilize the housing market is to lower supply and/or increase demand. Lower housing starts helps to lower supply. With demand still weakening this isn't going to be fixed overnight, but the housing market is adjusting as it should. I expect this to take longer to correct than most and continue to be net short this sector.

Youngstown, Ohio is doing its part to speed the correction. Link to article.