Housing starts measure initial construction of residential units (single-family and multi-family) each month. A rising (falling) trend points to gains (declines) in demand for furniture, home furnishings and appliances. Why Investors Care
| Released on 10/17/07 For Sep 2007 | |||||||||||||||||||||||
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Highlights
Housing starts fell badly in September, down 10.2 percent to a lower-than-expected annual rate of 1.191 million - the lowest rate since 1993. The markets had expected a 1.3 million unit pace for September. Permits are also at their lowest since 1993, down 7.3 percent in the month to a 1.226 million rate. The data reflect the swollen supply of homes on the market and, as reflected in yesterday's traffic data from the home builders' housing market report, lack of interest from buyers.
Within starts, weakness was led by the multifamily component. The multi-family component dropped 34.3 percent, following a 10.9 percent rise in August. The single-family component slipped another 1.7 percent after a 7.4 percent fall in August.
On a year-on-year basis, overall starts were down 30.8 percent in September, compared to down 27.7 percent in August.
Regionally, starts in September were weakest in the Midwest with a 28.4 percent drop, followed by an 11.7 percent decline in the South and a 10.1 percent fall in the West. Starts rose 45.4 percent in the geographically small Northeast.
Within housing permits, single-family permits fell 7.1 percent while multifamily permits declined 7.7 percent monthly.
On a year-on-year basis, overall permits were down 25.9 percent in September, compared to down 23.6 percent in August.
The September starts report show that housing is continuing to be a greater down pull on economic growth. The decline certainly will be spreading to consumer-related spending on furniture, carpet, and other direct spending on housing. The housing recession also will impact consumer willingness to spend and these issues are likely to start tipping the balance for another Fed ease on October 31.
Housing starts fell 2.6 percent in August to a 1.331 million unit rate, the lowest rate since June 1995. Permits fell more steeply, down 5.9 percent to a 1.307 million rate, also the lowest rate since June 1995. Everyone has essentially written this sector off for at least the near future - the big question being when is housing going to stop declining? Extremely high inventories of new and existing homes for sale point to another decline in starts in September. Also, the recent credit crunch likely cut into construction funding for builders. Between unsold inventories and financial difficulties of some homebuilders, starts could be under heavy pressure for a few months. This and additional ripple effects of housing weakness on consumer spending could help nudge the Fed into a rate cut on October 31.
Housing starts Consensus Forecast for September 07: 1.30 million-unit rate
Range: 1.25 million to 1.35 million-unit rate
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Monthly figures are often volatile; housing starts fluctuate more than many indicators. According to the Commerce Department, it takes six months for total housing starts to establish a trend. Consequently, we have depicted total starts relative to a six month moving average. |
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