Housing Starts Drop 32% to 17 Year Low

Tuesday, June 17, 2008 | 10:12 AM

The freefall in housing continues, but with a silver lining:

 HOUSING STARTS: Privately-owned housing starts in May were at a seasonally adjusted annual rate of 975,000. This is 3.3 percent (±10.7%)* below the revised April estimate of 1,008,000 and is 32.1 percent (±5.1%) below the revised May 2007 rate of 1,436,000.

Single-family housing starts in May were at a rate of 674,000; this is 1.0 percent (±9.9%)* below the April figure of 681,000. The May rate for units in buildings with five units or more was 280,000.

This is actually a net positive -- given the incredible run up in inventory, the reduction of new home starts is positive for the sector.

Note that the 3.3% monthly drop is less than the estimated relative standard error and is therefore not statistically significant. The year over year drop of 32%, however, is much greater than the estimated error,  and therefore is statistically significant.

Bloomberg adds: "Rising foreclosures, higher mortgage rates and declining property values threaten to keep home sales depressed in coming months, discouraging builders from starting new projects. Spending on residential projects may continue to be a drag on growth the rest of this year as builders try to work off excess inventories."

Hosuign_starts_61708
Chart courtesy of Barron's Econoday

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Sources:
NEW RESIDENTIAL CONSTRUCTION IN MAY 2008

Census Department, June 17, 2008
http://www.census.gov/const/newresconst.pdf

U.S. Housing Starts Drop to Lowest Level in 17 Years

Courtney Schlisserman
Bloomberg, June 17 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVrx2EuK2NzU&

Tuesday, June 17, 2008 | 10:12 AM | Permalink | Comments (4) | TrackBack (1)
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Tracked on Jun 19, 2008 4:56:10 AM

Comments

But homes are selling. My relative recently accepted an offer for a home on the market for less than 2 months. Nothing hinky about the deal in any respect. The offer price was a good one. The location of the home was not one of the hyper inflated markets of the housing boom. Too bad the Case Schiller index doesn't look at markets where people don't go crazy when money is involved.

Posted by: cinefoz | Jun 17, 2008 11:11:58 AM

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