Housing Starts Continue on Downward Path in July
Providing further evidence that the downward correction in the housing market continues, Commerce Department data released on Aug. 15 showed that home builders started work on new housing units in July at the slowest pace since January 1997, with a 6.1% decline to a seasonally adjusted annual rate of 1.38 million units.
“Builders are doing exactly what they should be doing at this point to work down their inventories and help the market get back on track — producing fewer new homes, pulling fewer permits for future projects and stepping up buyer incentives to move unsold inventory,” said NAHB President Brian Catalde.
“The numbers in today’s report are right in line with NAHB’s latest housing forecast and with the eroding builder confidence highlighted by our recent surveys,” noted NAHB Chief Economist David Seiders. “Declining starts and permits clearly reflect deepening problems in the mortgage market that erupted earlier this year in the subprime sector and now have spilled over into other components of housing finance — including the Alt-A and jumbo markets. These problems are deepening the housing downswing, delaying the subsequent recovery and adding significant uncertainty to our forecast.”
Single-family housing starts dipped 7.3% in July to a seasonally adjusted annual rate of 1.07 million units, the slowest pace since December of 1996, while multifamily starts fell 1.6% to a 311,000-unit pace.
Meanwhile, building permits, which can be an indicator of future building activity, declined 2.8% to a seasonally adjusted annual rate of 1.37 million units — the lowest since September of 1996. Single-family permits slowed 1.6% to a rate of just over one million units, and multifamily permits were down 6.1% to 370,000 units.
On a regional basis, housing starts declined 1.3% in the Northeast, 3.7% in the West and 11% in the South. Starts rose 2.6% in the Midwest, due entirely to multifamily gains. On a year-to-date basis, starts were down substantially in all regions of the country.
“While there is no immediate rebound in sight, NAHB is currently expecting new-home sales to stabilize by the end of this year and housing starts to stabilize by the middle of 2008,” said Seiders. “We expect overall economic conditions, including solid job and income growth, to continue to be supportive of housing. Furthermore, we expect interest rates in government-related components of the mortgage market to remain favorable on a historical basis and we’re assuming that other parts of the housing finance system will regain footing before long. Downside risks definitely surround the latter assumption.”
For more details, in-depth market analysis, forecasts and housing statistics, visit www.housingeconomics.com online. a publication from the NAHB Economics Group.