Single-Family Starts Skid to 17-Year Low
Single-family home builders continued to put the brakes on new construction in June, according to the latest data released by the Commerce Department on Thursday. Starts of new single-family homes declined 5.3 percent to a seasonally-adjusted annual rate of 647,000 units during last month -- the slowest pace in 17 years, and a decline of 64.5 percent from the peak of the building boom in January of 2006. Meanwhile, issuance of building permits for single-family homes also declined, dropping 3.5 percent to a rate of 613,000 units, signaling that future drops in start activity are likely in the months ahead as well. Even a sharp pullback in starts by builders, however, isn't likely enough at this point to offset a massive supply overhang that now exists, as foreclosures surge and distressed properties dominate many areas; likewise, demand has been shrunk dramatically by tighter (and perhaps more prudent) underwriting, as well as buyers (perhaps rightfully) sitting on the sidelines while prices continue to undergo a significant correction in key housing markets across the nation. Inflated supply and shrinking demand? It's Econ 101, baby. "The single-family data from today's report is exactly in keeping with what our builder members have been telling us in recent surveys," said National Association of Home Builders chief economist David Seiders. "Traffic of prospective buyers is down substantially, and consumer confidence is very low. Job-market losses, deepening problems in the finance arena and sinking home values aggravated by the wave of foreclosures are all contributing factors that are keeping potential home buyers on the sidelines." Most builders know it, too; which is why confidence is at all-time lows. The housing rebound once conveniently predicted for later this year (National Association of Realtors, we're looking right at you) is looking less and less likely to materialize, as a result. Overall housing starts and building permits in June posted some very misleading gains of 9.1 percent and 11.6 percent -- largely the result of a rush to start multifamily projects ahead of a code change in New York City. Excluding the Northeast multifamily data, there was a 4 percent decrease in overall housing starts, and a 0.7 percent gain in building permits for the month.