Wednesday, November 18, 2009

Housing Starts Decline Sharply in October

by Calculated Risk on 11/18/2009 08:30:00 AM

Total Housing Starts and Single Family Housing Starts Click on graph for larger image in new window.

Total housing starts were at 529 thousand (SAAR) in October, down 10.6% from the revised September rate, and up from the all time record low in April of 479 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959). Starts had rebounded to 590 thousand in June, and have move sideways (or down) for five months.

Single-family starts were at 476 thousand (SAAR) in October, down 6.8% from the revised September rate, and 33 percent above the record low in January and February (357 thousand). Just like for total starts, single-family starts have been at this level for five months.

The following graph shows total housing starts and the percent vacant housing units (owner and rental) in the U.S. Note: this is a combined vacancy rate based on the Census Bureau vacancy rates for owner occupied and rental housing.

Housing Starts and Vacant Housing UnitsIt is very unlikely that there will be a strong rebound in housing starts with a record number of vacant housing units.

The vacancy rate has continued to climb even after housing starts fell off a cliff. Initially this was because of a significant number of completions. Also some hidden inventory (like some 2nd homes) have become available for sale or for rent, and lately some households have probably doubled up because of tough economic times.

Here is the Census Bureau report on housing Permits, Starts and Completions.

Housing Starts:
Privately-owned housing starts in October were at a seasonally adjusted annual rate of 529,000. This is 10.6 percent (±8.7%) below the revised September estimate of 592,000 and is 30.7 percent (±8.3%) below the October 2008 rate of 763,000.

Single-family housing starts in October were at a rate of 476,000; this is 6.8 percent (±7.5%)* below the revised September figure of 511,000.

Housing Completions:
Privately-owned housing completions in October were at a seasonally adjusted annual rate of 740,000. This is 1.9 percent (±12.4%)* above the revised September estimate of 726,000, but is 29.9 percent (±9.7%) below the October 2008 rate of 1,055,000.

Single-family housing completions in October were at a rate of 528,000; this is 10.7 percent (±14.5%)* above the revised September figure of 477,000.
It appears that single family starts bottomed in January. However, as expected, it appears starts are now moving sideways - and will probably stay near this level until the excess existing home inventory is reduced.