Builders in the U.S. broke ground in
December on fewer houses than forecast, making last year’s
decline in homebuilding the worst in almost three decades.
The 14 percent decrease to an annual rate of 1.006 million,
the lowest since 1991, followed a 1.173 million pace the prior
month, the Commerce Department said today in Washington. For all
of 2007, starts were down 25 percent, the biggest decline since
1980, to 1.354 million.
Building permits, a sign of future construction, declined
by the most in 12 years, suggesting the housing slump will
deepen as it enters a third year. Rising foreclosures will throw
even more houses onto the market, hurting property values and
threatening to push the economy into recession, economists said.
Some other specific details:
December 2007 starts down 34.4% year over year from December ’06, and off -56% from January 2006 peak.
November 2007 new home sales at a 12 year low, inventory at 9.3 months at the current sales rate
Sources:
U.S. Housing Starts Drop to Lowest Level Since 1991
Shobhana Chandra
Bloomberg, Jan. 17 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aOla8HtUMRaA&
Housing Starts Plunge 14%, Marking Lowest Level Since 1991
JEFF BATER
January 17, 2008 9:09 a.m.
http://online.wsj.com/article/SB120057592779297397.html
Wouldn’t want to over-build…
This will probably worsen. Builders in my area are having a hard time getting interims for custom jobs. Forget specs.
Love the markets. It’s like being pecked to death by a duck!
I was amazed at how much worse the number was then economists had estimated it would be.
When I talk to people about real estate, many of them still have very unrealistic views about what their house is worth.
This shows you that we are still in denial to a large extent.
I wonder if the management teams running the big financial companies are still in denial too?
Another sign is the demise of “intial jobless claims” as a recession indicator. Intial and “Continuing” are way out of whack with each other.
This is what happens because of the demise of “smoke stack” industries.
The recession started in areas where jobless claims are not available hence little rise other than a surge due to the inventory correction in auto’s. I expect when the next “credit wave” comes in the next few weeks, business spending will drop and the recession will extend to parts of the economy that still are eligible for jobless claims, they will rise, but it just shows how “21st” century this downturn is.
This also means jobless claim data from the 2000’s expansion hasn’t been that good due and the labor market weaker than headline unemployment indicated. Pretty sobering stuff.
“the biggest decline since 1980”
Other 1980 similarities: the “REAL” inflation rate, precious metals prices and dare I extrapolate…stagflation?
I just saved a ton of money on my car insurance.
I don’t know why anyone would sell a mortgage for less than 7.5% today. Now I understand that Treasuries are high but 6% mortgage rates are ridiculous. Denial is still rampant.
At this point, we want to see these numbers as bad as possible don’t we?
Housing inventory is the big overhang of everything. The sooner we clear it out, the better.
A little OT, but jeez, talk about yer inflation! Used to be a cool 10 percent bought you a “correction.” Pisani’s now quoting me 20%!
BTW, Barry, love the fusionIQ, but I need to cancel the trial and can’t figure out how. Any help?
From the looks of it, nobody will ever buy a house again, according to economists. Building permits will soon cease to exist as nobody will ever build a new house. Never. None. Lower interest rates can’t possibly make a difference. Everyone in the country will soon be out of work. Banks are secretly planning to never make another loan. Nobody will ever buy anything again, except for $5.00 a gallon gasoline. This will force all business in the country into bankruptcy. It’s time to stockpile food in the basement and shoot anyone at the front door. And you can’t eat gold! Everything is Terrible!
Barry – just curious, do you currently own a home?
One more thing, everything the government tells you is a lie.
One, or several, bad decision deserves another– A blanket freeze on teaser and option arm rates is coming to a neighborhood near you soon.
Michael C – you are right on. If we are to get rid of the existing inventory, this number has to go down significantly.
Slowly but surely the housing mess will get cleaned up. However, the only way to “fix” the economy is to start paying employees inflation adjusted wages. Most of my friends haven’t seen real income gains for close to 10 years.
cieforz,
Yes, the site is a little over the top. However, to give Barry and the posters here credit, they have predicted the current housing led stock market correction which started in July. That being said, most here were calling for this correction (or crash if you like that term better) for the better part of 2 years. In that time, they definately missed out on some upside.
I have listened along the way and have a 30% cash position and 10% short SDS and QID, so thankfully the WORST January in history (I believe we are on pace for it) won’t be have hurt me as bad as it could have.
My feeling is we correct another 3 – 5% and then form a base starting in the summer/fall. Next years 4th quarter comps (for the banks at least) should be real, real easy to top. Remember, it’s not current earnings (or losses in this case) that matter, it’s the future stream of earnings, which is surely to be better than now (with record write-downs from CDO fiasco).
cieforz,
Yes, the site is a little over the top. However, to give Barry and the posters here credit, they have predicted the current housing led stock market correction which started in July. That being said, most here were calling for this correction (or crash if you like that term better) for the better part of 2 years. In that time, they definately missed out on some upside.
I have listened along the way and have a 30% cash position and 10% short SDS and QID, so thankfully the WORST January in history (I believe we are on pace for it) won’t be have hurt me as bad as it could have.
My feeling is we correct another 3 – 5% and then form a base starting in the summer/fall. Next years 4th quarter comps (for the banks at least) should be real, real easy to top. Remember, it’s not current earnings (or losses in this case) that matter, it’s the future stream of earnings, which is surely to be better than now (with record write-downs from CDO fiasco).
Bottom within 3 months around 30% below November highs. Then the summer of our discontent.
Stocks have hit a short bottom today. March/April should be the big bang, but I would pull out and enjoy the shortside winnings for now.
everyone is depressed….even rush limbaugh said obama or hillary will win the election because of the economy.
OT but I think I will throw it out for discussion and see if I get any bites. Has anyone noticed the shape of the yield curve lately, it is a wierd U shape, it was inverted about a year ago, which is never a good sign, but then righted itself, but over the last month it has started to look goofy. I know how to interprut an inverted yield curve, it means that the economy is going to slow sharply about a year out, and a steep positive curve, better growth and more inflationary pressure, but what does a U say?
term Now month ago
3m 2.93 2.93
6m 2.87 3.23
3yr 2.31 3.13
5yr 2.86 3.51
10yr 3.61 4.12
30yr 4.24 4.53
The shape of the yield curve is important because it has an implicit forecast of future interest rates. If i have an obligation I have to meet in 2 years I have a choice, I can buy a 2 year note, or I could buy a 1 year note and then roll it over at the end of the year (insert as many itterations as you want for different maturities). Normally, since a 2 year note has a greater duration it is higher risk, and should carry a some what higher yield that the 1 + 1 option, but they should be close. If the 2 year is lower than the 1 year it implies that the market expects the rate on a one year note, one year from now to be lower than it is today. I just dont know how to make sense of the U shape. One hypothosis is that the market expects lower rates in teh near future, due to a soft economy, but for inflation to pick up later on. I’m just trying to think this through, my gut says there is some significance to this.
Didn’t Barry post a link earlier this year which showed that housing bottoms with an average of a 50 percent decling in new housing starts.
Or should I have put the crack pipe down a bit earlier in the day.
Cinefoz, me thinks your caricature is too negative to represent the consensus on this site. (But, funny anyway!)
>> I just saved a ton of money on my car insurance.
Dirty Mac, that was great! I hate the GEICO ad campaign. But, in this context, it caught me offguard.
Barry or anyone else… is there a reliably available source for current house price/income ratios broken out by region? As I recall this had historically averaged ~3x, but in recent years some areas had gotten above 8x. I see this figure trotted out every few months in various publications, but it would be nice to be able to check regions on-demand.
Alternatively, I’d be content to do the division myself if I could get a good source for a clean numerator and denominator.
Any suggestions?
We need another weak spring-summer in housing for the last of the disbelievers to realize that they are delusional when they say: “I’m sure everything will get back to normal next high season. Well, at least I sure hope so!”
That will be the reality check I am looking for. I live in what has been one of the strongest housing markets (NC), and it is still a mixed bag of people reducing their home prices and those who stubbornly believe the spring will bring another wave of bidding wars.(What these people do not realize is that this extremely strong market has been exceptional BECAUSE of the boomers leaving NY, FL, CA, etc. and those people are not moving as quickly as planned.)
IMO, that may bring some broader based capitulation in the housing market …
I would really love to know why the MSM is referring to recession as if it were the Black Death. Isn’t recession a normal part of the business cycle? In every story you read now, even in “serious” papers like the NY Times and the WSJ, the term is couched in dread and loathing. “IF” a recession is coming. “TO KEEP the economy from slipping into a recession”…when did recession become the Boogyman? To be avoided at ALL costs, no matter how slip-shod or short term. (another fed cut?!)I’m no finance person, simply an interested layman who has followed business news for 15 years, and this recent change of tone has struck me as particularly odd. Anyone think so, too? Any theories, Barry?
ChrisD, I can’t speak to reliability but The Bubble Buster does a nice payments-to-income ratio for a bunch of different metros:
http://www.thebubblebuster.com/
Jtil: Because recession means more anxiety, more layoffs, more impacts to everyone’s families. Most people aren’t sitting on a whole lot of cash to ride out a major period of unemployment.
Has anyone but me considered that due to the jobless recovery that the coming recession will not cause significant job losses – as least not for a long time?
Instead, it will cause a retraching of business expenditures and and a retraction of unprolifigated growth based on the debt-based bets that prices always go up.
In other words, a deflationary recession.
The job losses would start to build if recession began to border on depression, instead.
I am amazed at how Congressman Ron Paul has predicted the housing bubble and financial crisis our country is currently experiencing yet mainstream media continues to ignore Ron Paul. I am assuming that mainstream media is owned by corporations who still want to make a profit and they think as long as they keep telling us we aren’t in trouble people will believe it. Do yourself and your country a favor-visit http://www.ronpaul2008.com