Housing starts in the U.S. fell more than forecast in September as construction of single-family homes plunged to the lowest level in 26 years, indicating the three-year real-estate slump is intensifying.Nail In Housing Coffin?
Construction of single-family homes dropped 12 percent to a 544,000 annual rate, the Commerce Department said in Washington. Starts on all residential properties, including condominiums, slid to 817,000, below all 74 forecasts in a Bloomberg News survey.
"The full impact from the financial meltdown is yet to come," said David Sloan, a senior economist at 4Cast Inc. in New York, whose estimate matched the lowest in the Bloomberg survey. "Housing will be a drag on growth into the middle of next year. The bottom is now looking further away than it did previously."
Building permits, a sign of future construction, dropped 8.3 percent to a 786,000 pace, matching the lowest level since November 1981.
Total starts were projected to fall to an 872,000 annual pace, according to the median forecast of the economists polled by Bloomberg News. The reading for August was revised down to 872,000 from a previous estimate of 895,000.
Compared with September 2007, work began on 31 percent fewer properties. Work on multifamily homes, such as townhouses and apartment buildings, climbed 7.5 percent from the prior month to an annual rate of 273,000.
Starts of single-family houses dropped to record lows in three of four regions in September, led by a 24 percent slump in the Midwest.
"These things are putting a new nail" in the housing market's coffin, David Seiders, chief economist at the National Association of Homebuilders, said in an interview on Bloomberg Television yesterday. "this sort of vicious feedback loop is still in play."
David Seiders, chief economist at the National Association of Homebuilders has this ass backwards as does David Sloan. It is going to take a complete washout in starts and permits before housing can bottom. Inventory is still massive and involuntary foreclosures are going to rise yet again as will voluntary walk-aways.
It makes no economic sense to keep building, especially on spec, in an environment with massive amounts of existing inventory. This plunge in starts and permits is actually a necessary part of the healing process. The deeper and faster starts plunge, the faster the bottoming process. It is as simple as that.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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