Wednesday, February 18, 2009

Quarterly Housing Starts and New Home Sales

by Bill McBride on 2/18/2009 02:59:00 PM

The Census Bureau has released the "Quarterly Starts and Completions by Purpose and Design" report for Q4 today.

It is incorrect to directly compare monthly housing starts to new home sales. The monthly housing starts report from the Census Bureau includes apartments, owner built units and condos that are not included in the new home sales report.

However it is possible to compare "Single Family Starts, Built for Sale" to New Home sales on a quarterly basis. The quarterly report shows there were 65,000 single family starts, built for sale, in Q4 2008 and that is less than the 82,000 new homes sold for the same period. This data is Not Seasonally Adjusted (NSA). This suggests homebuilders are selling more homes than they are starting – but not by much.

Note: new home sales are reported when contracts are signed, so it is appropriate to compare sales to starts (as opposed to completions), although this isn’t perfect because homebuilders have recently been stuck with “unintentional spec homes” because of the high cancellation rates.

Housing Starts Click on graph for larger image in new window.

This graph provides a quarterly comparison of housing starts and new home sales. In 2005, and most of 2006, starts were higher than sales, and inventories of new homes rose sharply. For the last several quarters, starts have been below sales – and new home inventories have been falling - but it continues to be a race to the bottom between starts and sales.

Housing Starts The second graph shows the NSA quarterly starts intent for four categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale.

Condo starts have collapsed to almost zero (8 thousand started in Q4 2008) and owner built units have fallen by about half. Units built for rent have held up the best, and they are still well off the highs of recent years.

Condos built for sale tied the record low set in Q1 1991 (data started in 1975). Owner built units set a new record low (33,000 units compared to 35,000 units in Q1 1982), and of course single family units built for sale set a record low (65,000 compared to 71,000 in Q4 1981).