Housing starts plunge 14.3% to 10-year low

Discussion in 'Wall St. News' started by S2007S, Feb 16, 2007.

  1. S2007S


    Have no worry, this should pick up by spring time.. hahahahahaha

    Housing starts plunge 14.3% to 10-year low
    Pace of building new homes down 37.8% on year-over-year basis

    By Rex Nutting, MarketWatch
    Last Update: 9:05 AM ET Feb 16, 2007

    WASHINGTON (MarketWatch) -- U.S. home builders started the fewest homes in nearly a decade last month, as housing starts plunged 14.3% to a seasonally adjusted annual rate of 1.408 million, the Commerce Department reported Friday.
    January's rate was the lowest for housing starts since August 1997. Starts were down 37.8% compared with January 2006.
    Also, building permits dropped 2.8% to 1.568 million in January, 28.6% below the same month a year ago. Read the full government report.
    The starts figure was much lower than expected on Wall Street, where economists were looking for a 2% drop to 1.60 million annualized units. The permits figure was close to the median forecast of 1.58 million expected in a MarketWatch survey of economists. See Economic Calendar.
    The stunning drop in home construction indicates that builders are scaling back their plans on a massive scale, aiming to work down the excess inventory of unsold homes on the market.
    On Thursday, the National Association of Home Builders reported that its survey of builder sentiment rose in February to the highest level since June. Builders were much more optimistic about sales in six months than in current conditions. See full story.
    But hopes, such as those expressed by Federal Reserve Chairman Ben Bernanke this week, that a bottom in the housing market has been reached will have to be reconsidered in light of January's starts and permits data.
    In a separate report Friday, the Labor Department said the producer price index fell 0.6% in January, with core prices excluding food and energy rising 0.2%. Both figures were exactly as expected.
    Bonds rallied after the two reports, while the dollar fell. Stock futures ticked higher, then retreated. See Indications.
    Crunching the numbers
    Last month's single-family starts dropped 11.2% to a seasonally adjusted annual rate of 1.108 million homes, the lowest since August 1997, while permits for single-family homes fell 4% to 1.121 million, the lowest since December 1997.
    Starts of multifamily units fell 24%, while permits for multifamily units rose 0.4%
    Starts fell in three of the four regions as tracked by the Commerce Department in January, as the Northeast enjoyed warmer temperatures and drier-than-normal weather in the first half of the month. Starts rose by about 9% in the region.
    Starts fell by 28% in the West, by 15% in the Midwest and by 12% in the South. Starts in the Midwest were at the lowest level since 1991. Starts in the West fell to the lowest level since 1996. It was the biggest drop in the West since 1979.
    Completions of new homes fell 1.2% to a seasonally adjusted annual rate of 1.88 million, an indication that a significant amount of new supply's still hitting the market. It can take about six months for a home to go from groundbreaking to completion.
    There were 1.2 million homes under construction in January, down 14% from the previous January.
    Two weeks ago, the Commerce Department reported that the number of vacant homes increased by 34% in 2006 to 2.1 million at the end of the year, nearly double the long-term vacancy rate. Economists said there are 1 million excess homes.
    The government's housing data are subject to large sampling and other statistical errors. It can take five months for a new trend in housing starts to emerge from the data.
    In the past five months, housing starts have averaged 1.56 million on an annualized basis, down from 1.61 million in the five months running through December and 2.12 million for the period ended January 2006.
    Starts in November and December were revised lower by a cumulative 22,000 annualized. End of Story :p :p :p
  2. And pricing is under pressure, too:

    Home Prices Fall in More Than Half of Nation’s Biggest Markets

    Published: February 16, 2007

    Prices for single-family homes fell in more than half of the nation’s 149 biggest metropolitan areas in the last three months of 2006, according to data released yesterday by a trade group for real estate agents.

    The figures from the National Association of Realtors show that the housing market weakened noticeably in many parts of the country at the end of last year and indicate that suggestions by some industry officials that the market has hit bottom could be premature. In the previous quarter, prices fell in one-third of all metropolitan areas.

    The biggest price declines were concentrated primarily in two kinds of cities: the formerly booming markets along the coasts and in the Southwest, and in Midwest and Northeast cities hurting from the loss of manufacturing jobs. The biggest declines, for instance, were in Florida — Sarasota-Bradenton (down 18 percent), Palm Bay-Melbourne (17 percent) and Cape Coral-Fort Myers (11.7 percent). The declines in prices were especially steep for condominiums.

    “You have two kinds of weakness here: there is the traditional economic-driven weakness in parts of the Midwest, and there is the bubble-bursting weakness,” said Jan Hatzius, chief United States economist at Goldman Sachs. “That’s what is bringing down the national home price appreciation rate.”

    Among the 10 cities with the biggest declines was New Orleans, which has struggled with a slow pace of reconstruction since Hurricane Katrina hit the area in August 2005. Median prices — half the homes sold for more and half for less — fell 9.3 percent there, to $162,100. Mr. Hatzius said the decline in New Orleans might also reflect a correction, because prices there shot up in the months after the hurricane.

    Nationally, the median price of single-family homes fell 2.7 percent, to $219,300.

    Atlantic City and Salt Lake City topped the list of metropolitan regions where prices increased in the fourth quarter. Broadly speaking, prices were strongest in the Northwest and in some parts of the South.

    At the same time, the number of homes sold fell in 40 states and in the District of Columbia. Nevada and Florida each reported declines of more than 30 percent; in Arizona, Virginia and the District of Columbia, sales fell by more than 20 percent. Nationwide, sales fell 10.1 percent in the fourth quarter from the same period in 2005, to an annual pace of 6.24 million.

    Sales increased in six states — Alaska, Mississippi, Kentucky, Texas, Arkansas and Illinois — and were flat in Utah. The Realtors did not have enough data on sales in Idaho, New Hampshire and Vermont.

    In addition to weaker sales and declining prices, the number of homes on the market has been climbing. That suggests, economists say, that prices may have to fall further for sales to pick up and the overall housing market to recover. In the fourth quarter, the vacancy rate for owner-occupied homes was 2.7 percent, up from 2 percent a year before and the highest it has been since the Census Bureau started compiling the data in 1956.

    “That means we have got a while before this thing fully adjusts,” said Edward Leamer, an economist at the University of California, Los Angeles. Mr. Leamer noted that individual sellers often preferred to wait rather than cut the price to a level that would be agreeable to most buyers. That gap between seller and buyer is reflected in the decline in sales and the buildup in the number of homes sitting vacant.

    Still, the Realtors group said it expected home sales and prices to rise in the spring. “Home sales are leveling at historically high levels, and examination of data within the quarter shows home prices stabilizing toward the end,” David Lereah, the group’s chief economist, said in a statement.

    Unlike some other sources of data, the Realtors group does not adjust home prices to reflect changes in the kinds of homes being sold. So if this year’s sales include a larger number of cheaper homes, compared with a year ago, it will appear that home prices are falling even if the actual price of any given home has not declined.

    Some indexes, including one compiled by the Office of Federal Housing Enterprise Oversight, the federal agency that oversees Fannie Mae and Freddie Mac, do take into account the kinds of homes sold. The government index shows that prices were still rising through the third quarter of 2006, albeit at a far slower pace than in 2005.
  3. dac8555


    i dont understand how this has not impacted the economy?
  4. It has.

    Perception lags reality, until average joe sees the headlines and acts accordingly, which has now begun.

    Average joe won't buy that new car, RV, boat or speculative piece of real estate when he worries that his house may not appreciate, and/ore he can no longer borrow additional sums using his home as collateral.

    Then, of course, banks are already restricting lending. That's the additional liquidity squeeze.

    All this talk of 'housing and automobile weakness hasn't been a contagion' will soon turn to 'housing and auto weakness has finally spread into the broad economy.'
  5. Existing Home Sales Sink Across Nation

    Posted on Feb 16th, 2007 with stocks: HOV, PHM, TOL


    Existing-home sales fell in 40 of the country's metropolitan areas in Q4, according to the National Association of Realtors [NAR]. This is the first time the organization has ever recorded declines in a majority of U.S. cities. 2006 was the first year to suffer a decline in sales after five record-breaking years. Sales across the country dropped more than 10% in the quarter versus the same period in 2005. The Western states were particularly hard-hit, with sales 17.8% down from the year-ago period. Florida was the worst-performing state in the country with a 30.8% drop in sales. Atlantic City, N.J. was the biggest gainer, with sales up 26%. The value of existing single-family homes declined across the country, with the median sales price down 2.7% to $219,300 at the end of Q4 against $225,300 a year earlier. NAR chief economist David Lereah put a positive spin on the report: "This information confirms 2006 was the year of contraction," he said, "and hopefully the fourth quarter was the bottom of this current business cycle." His optimism is bolstered somewhat by new data on the confidence of U.S. homebuilders, which has risen to its highest level since June.

    Sources: Reuters, Bloomberg, Wall Street Journal
  6. crnindia


    In India also I am seeing some selling pressure in properties after they have been rising for last 7 years. I can see suddenly that buyers are not absent from the market since last 15 days.

    Could be the US effect in world markets also.Let us see if it is temporary or permanent. (It is really ridiculous prices to buy so high). Well, but no high is higher as they say price is the real thing.
  7. THIS IS SCARY. Just went onto the cool, new real estate site http://www.zillow.com only to see that our house has lost $38k in value over the past 30 days.
    I was shocked...couldn't believe it.
    then I saw our new neighbor's house purchased 18 months ago has lost $68k in value since they purchased it !
  8. Zillow for the most part is an absolute joke.

    The house I currently rent would sell if they got a sucker to buy it for about 380-400 range... zillow says it's worth 526K ROTFLMAO...

    It's another tool for people to think their homes are worth more than they are IMHO. In sopme areas it may be somewhat close to actual value, not here!
  9. Nice post.

    I'm still not sure if the world can die with a Bond market below 5%. I remember looking at a lease on a BMW 320i in probably 1982. (I was flush with cash as a young guy, lol). With finance rates of 19.99% or whatever they used to be, that car was not much cheaper per month than a BMW today!

    I suspect housing is much the same. The median priced home in the U.S. is still solidly priced in the 200's. Not a big deal to carry. Even for a waitress.

    I'm also not one to get hyped by home builders and NEW home sales/starts. America is running low on "good" land. Just because the flood of anxious buyers has slowed in the freakin' Imperial Valley doesn't mean that some NBC cameraman is going to be puking his home in Studio City on the cheap.

    Part of me still thinks the play is betting that the rich continue to get richer (i.e. exploding asset valuations) while the poor get poorer vis a vis wage pay in devaluating currencies with diminished purchasing power.

    We'll see. My guess? Folks get shaken out over the next few years and then hyper inflation.
  10. S2007S


    by lo its hard to see how this has impacted the economy, in my opinion a strong stock market with good wages and strong employment has yet to slow down. I would have thought by now that some of it would have been felt. They are already talking about housing picking back up in spring and that the worst is behind us, if this is the case this bull market should have no problem running another 10-20% by the end of 2007. Seems that if a housing dropoff can hurt this economy what can???
    #10     Feb 17, 2007