Housing Starts Hit Rock Bottom, For Now

Same story, different month: single-family housing starts fell again in October, this time by 4.5 percent to a seasonally-adjusted rate 791,000, bringing new construction to its lowest level since just after World War II, the Commerce Department estimated Wednesday. Housing starts have now plunged 38 percent in the past year, and are down 70 percent from the peak of the market in early 2006, according to a MarketWatch report.

The Northeast led the way, posting a 31 percent drop from September to October. The Western region of the U.S., surprisingly, actually increased its housing starts by 7.5 percent in October, although starts remain 39.1 percent below year-ago levels, above the national average.

Single-family housing starts fell 3.3 percent in October to 531,000, according to the report, while multi-family housing starts fell a comparatively more steep 5.7 percent within the same period. Starts noticeably lagged completions as well, with single family completions registering 760,000 during the month, off 7.7 percent from Sept.’s total; with starts falling like a rock, it seems to only be a matter of time until completions follow suit, and take more construction jobs with them.

Building permits, a leading indicator of new home starts, fell 12 percent to a record-low seasonally adjusted annual rate of 708,000 in October. Permits for single-family homes fell even more sharply, dropping to a rate 460,000, the Commerce Dept. said, the slowest such pace in 26 years.

The drop in housing starts comes as no surprise, as builder confidence fell like a rock off of already historic lows during November, according to the National Association of Home Builders/Wells Fargo Housing Market Index, released Tuesday.  See full story.

But if there is a nugget of good news in the dismal housing data here, it’s this: housing starts need to fall, in order to allow home builders to work through vast amounts of unsold inventory. (The same logic, too, applies to completions). The worse the start data gets, the more pain it portends for the home building segment, but the closer it may move us towards righting the proverbial ship in the nation’s battered housing markets.

– With contributions from Paul Jackson.

Write to Kelly Curran at kelly.curran@housingwire.com.