housing starts definition

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					Housing Starts
  in February 2008


Analysis by George Ratiu

      NAR Research

   Data Released: 3-18-2008
 Data Source: Census and HUD
              Monthly Housing Starts
                            2006 to Current
2500
         In thousand units
2000


1500


1000


 500


   0
20 - D v




20 - v
20 - M pr




 20 - S g




20 - M pr




 20 - S g
20 6 - p




20 7 - p
20 7 - c




20 - c
20 - ul




20 - ul
20 6 - ct




20 7 - ct
20 - n




20 7 - n




      -F n
          y




          y
 20 - b




20 06 n




 20 - b




20 7 n




        eb
20 - r




20 7 - ar
   0 6 Ma




   0 6 No




   0 7 No
   0 e




   0 8 De
   0 6 Au




   0 7 Au
   06 a




   07 a
   0 e




   0 e
   06 Ja




   0 Ja




   08 Ja
        u




    0 u
   06 Fe




   07 Fe
   06 - J




   0 O




   07 - J




   0 O
  06 A




  07 A
   0 M
 20 - J




 20 - J
20 6 -
   0
20




•Starts have been essentially unchanged in the past three months (after an upward
revision for January).
•In February, they declined by only 0.6%. They are still down 28.4% from a year ago.
•Compared to 2005, the current activity has been cut by more than half.
•The gain was entirely in multifamily units. Single-family starts continue to fall.
               Monthly Housing Starts
                          2000 to Current
  2500
           In thousands
  2000


  1500


  1000


   500


       0
     01 l




     02 l




     03 l




     04 l




     05 l




     06 l




     07 l




     08 l
    20 an




    20 an




    20 an




    20 an




    20 an




    20 an




    20 an




    20 an




           an
   20 Ju




   20 Ju




   20 Ju




   20 Ju




   20 Ju




   20 Ju




   20 Ju




   20 Ju
        -J




        -J




        -J




        -J




        -J




        -J




        -J




        -J




        -J
         -




         -




         -




         -




         -




         -




         -




         -
      00




      01




      02




      03




      04




      05




      06




      07
  00
20




•Steady rises during the market boom (with strongly rising home prices) from 2000
to 2005.
• Sharp declines in the past two years; declines are needed due to high inventory
• More cutbacks are encouraged to better help stabilize the housing market.
             Monthly Housing Starts
                             Long History
 3000
         In thousands
 2500


 2000


 1500


 1000


  500


    0
19 - n
19 - n
19 - J n
  68 an

19 - n
19 - n
19 - n
19 - J n
19 - n
19 - n
19 - n
19 - J n
19 - n
19 - n
19 - n
19 - n
19 - J n
19 - n
20 - n
20 - n
20 - J n
20 - n
20 - n
         n
        an
  62 Ja
  64 Ja
  66 Ja


  70 Ja
  72 Ja
  74 Ja
  76 Ja
  78 a
  80 Ja
  82 Ja
  84 Ja
  86 a
  88 Ja
  90 Ja
  92 Ja
  94 Ja
  96 a
  98 Ja
  00 Ja
  02 Ja
  04 a
  06 Ja
  08 Ja
     -J
19 -




19 -
  60
19




• Baby boomers were forming households in 1970s
• Declines in starts in the past were accompanied by rising interest rates
• The current decline is unique in that interest rates are at historic lows
• Recent slowdown in household formation to 707,000 is puzzling. Household formation
generally rises by 1.2 million or higher.
       Housing Permits for Single-family Units
                             2000 to Current
  2000
  1800     In thousands
  1600

  1400
  1200
  1000

   800
   600

   400
   200

       0
     01 l




     02 l




     03 l




     04 l




     05 l




     06 l




     07 l




     08 l
    20 an




    20 an




    20 an




    20 an




    20 an




    20 an




    20 an




    20 an




           an
   20 Ju




   20 Ju




   20 Ju




   20 Ju




   20 Ju




   20 Ju




   20 Ju




   20 Ju
        -J




        -J




        -J




        -J




        -J




        -J




        -J




        -J




        -J
         -




         -




         -




         -




         -




         -




         -




         -
      00




      01




      02




      03




      04




      05




      06




      07
  00
20




•Housing permits for single-family units – a leading indicator for future starts – are
declining fast, helping to control inventory
• Decline in new home construction will, however, hold back GDP growth as job cuts will
continue in the residential construction sector
•The latest figure of 639,000 is down 6.2% from January and 42% from a year ago.
                          Summary
• Total housing starts decreased 0.6% in the latest month
   – Single-family units fell to 707,000 from 758,000
   – Multifamily units rose to 331,000 from 289,000 over the one
      month period

• The multifamily units are bouncing back. Condo market is
  challenged, but apartments are doing fine because apartment rents
  have been rising 4% year-over-year.

• Housing permits, generally a reliable future indicator for housing
  starts, fell again on single-family units to 639,000 – the lowest since
  early 1990s.

• Regionally, housing starts for February 2008 compared to January
  2008
    –   Were down 27.7% in the Northeast
    –   Were unchanged for the Midwest
    –   Were up 3.9% in the South
    –   Were up 5.1% in the West
                         Summary

• For the economy, a decline in construction activity hurts economic
  growth. However, for the housing market the cutbacks in production
  are needed in the current high inventory conditions. New home
  inventory on the market has been sliding down over the past year but
  still remains elevated. Further cutbacks are welcome to bring down
  inventory at which point home prices can strengthen. Rising home
  prices will lessen foreclosures.

• The forecast is for a continuing weakening in starts on single-family
  units through the end of 2008.

				
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posted:1/16/2009
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