It is no secret that builders are hurting, and some experts predict that upwards of half of them will be out of business before this economic crisis is over. The tough real estate market plagued by indecisive buyers and oversupply, combined with the restrictive lending environment, means that even those builders who manage to stay in business are still going to be hurting. It should be no surprise then that new construction is reaching all time lows. Overall it is a good thing, and something that needs to happen in order to allow the market to recover, but it is painful for builders nonetheless. Tim Iacono from The Mess That Greenspan Made looks closer at the latest new homes report and offers his take in his blog post below.
The Census Bureau reports new home construction reached record lows last month, a fitting end to the worst year in the home building business since record keeping began in 1959.
Housing starts fell 15.5 percent in December to a seasonally adjusted, annualized rate of just 550,000, worse than the previous low of 651,000 set in November.
In population-adjusted terms, the previous record monthly lows in the low-700,000 range set in the mid-1970s are about double the current rate of home building, an astonishing statistic.
For example, prior to 2008, the low-water mark was 709,000 in May of 1975 which would be just over one million after adjusting for the growth in the U.S. population.
During all of 2008, housing starts totaled just 904,000, a decline of 33.3 percent from the level of 1.36 million units in 2007. The previous low was in 1991 when 1.01 million units were started, a total that, after adjusting for the increase in population was actually worse than last year.
Building permits, a leading indicator for new home construction, dropped to an annual rate of 549,000 in December, a decline of 10.7 percent from November, and also a record low.
This follows yesterday's dismal report by the National Association of Home Builders that pessimism has reached new all-time lows. The monthly confidence survey dropped to just 8 in January, down from 9 in December. Recall that, not more than two years ago, this index was over 50.
This post can also be viewed on themessthatgreenspanmade.blogspot.com.