Great News! Housing Starts and Permits Plummet!

Housing starts fell 0.6% in February and permits for new construction plunged 7.8% to the lowest level in 16 years. The housing report showed February starts were 28.4% less than the level of February 2007.

Given that the enormous overhang in inventory is a huge part of the problem, this is, perversely good news.


New Home Starts

Building Permits


Continuing to add to the supply in this environment would be sheer madness.


Housing Starts – Single-Family Units Post Largest Cyclical Decline on Record
Asha G. Bangalore
Northern Trust

Housing Starts Slip While Permits Drop Sharply
WSJ, March 19, 2008; Page A2

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What's been said:

Discussions found on the web:
  1. edhopper commented on Mar 19

    I don’t think this is all just good business sense on their part. These are the same builders who bought land and built spec homes like there was no tomorrow, until their drunken spree ended.
    They are all heavily leveraged and many on the brink of bankruptcy. They must get credit to build more and in the current market there is no one to give them credit to continue building.

  2. Mr. Obvious commented on Mar 19

    More good housing news:

    Applications for U.S. home mortgages last week fell to their lowest since December despite a sharp drop in borrowing costs, according to data from an industry group on Wednesday.

    The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity declined 2.9 percent to 652.0 in the week ended March 14. It was the lowest since the last week of December.

    The MBA’s seasonally adjusted index of refinancing applications fell 4.6 percent to 2,335 last week, despite a drop in long-term mortgage rates. The average 30-year fixed mortgage rate plunged 0.39 percentage point to 5.98 percent, the MBA said.

    Of course, cinefoz says that we are doomers and housing is going to “normalize” in the next two months….

  3. JustinTheSkeptic commented on Mar 19

    Oh! but Congress is going to come to their rescue and give them more hand-outs so that they can build more homes – just what the market needs. Sorry folks, but in all honesty, no matter what they say it is going to get alot worse, long-term. Let these idiots that CNBC trudges out there say different – like bullish times are here again. BULL SHIT!

    Interesting technical: On the “weekly” the Dow hasn’t even penetrated the 200 week…it did it big-time back in October 2001. Yes, every time frame is different…will just have to wait and see how different.

  4. ef commented on Mar 19

    When numbers were so gross, outliners, why wouldn’t we expect an even grosser drop? HHmmm…

    Does that mean we can spend money on existing old homes (beside badly needed repairs, how about greener too), rebuilding decaying schools, electrical grid, alternative energies, bridges, cities, — and in general our old infrastructure? Really, do we need more cookie cutter McMansions?

  5. tbapple commented on Mar 19

    Anecdotal evidence from long Island NY:

    A family friend has been looking to move up to a larger house in the same suburban town. They’re not having trouble selling their house but they are having trouble finding a new one. it seems that, at least in my town, the inventory is low.

    We live in a fairly affluent area and my guess is that most homeowners don’t need to sell and are just waiting out this downturn. Or all the upside ones can’t afford to have a new appraisal.

  6. Marcus Aurelius commented on Mar 19

    They’re still adding inventory, it’s just at a slower rate. As with all things Bushy (think budget), moving backward more slowly is the new moving forward.

  7. Winston Munn commented on Mar 19

    Housing continues to crumble yet Bernanke and the Fed have bet the farm on a quick turnaround and a short, mild recession.

    The Fed holds about $700 billion in treasuries on its balance sheet – which it has declared its willingness to exchange for MBS. 3-6 months from now, the Fed balance sheet will look much different.

    If housing continues to plummet, the Fed’s balance sheet will take on the characteristics of an overleveraged hedge fund.

  8. Mr. Obvious commented on Mar 19

    Winston…good point. I just realized that. The Fed is, after all, a bank. It is exchanging good for bad in an attempt to keep the market liquid. If housing rebounds, then the Fed’s gambit pays off.

    But if housing continues to crater, then the Fed’s balance sheet really starts to look like crapola. Not quite sure what happens then…

  9. Van commented on Mar 19

    It looks like your second chart is a repeat of the Housing Starts instead of Building Permits. Keep up he great work!

  10. Emmett commented on Mar 19


    Both charts are identical.

  11. SwissLuxury.Com commented on Mar 19

    “the Fed’s balance sheet really starts to look like crapola. Not quite sure what happens then…”

    Easy, Paulson just gives them a new balance sheet or a side of SIV! Not sure the bond market will like it however.

  12. Adam Smith commented on Mar 19

    So wait a minute, you’re saying the free market is starting to kick in? Oh that naughty “invisible hand”!

  13. nick gogerty commented on Mar 19

    I think this data should be shown on a per capita basis to really appreciate it. We are significantly below the 1980 low. Populations growth is roughly .95% per year. On a per capita basis, we are in record territory.

  14. Winston Munn commented on Mar 19

    Mr. Obvious,

    On a related note, consider the Fed’s liabilities – currency. Federal Reserve notes are backed by debt. Until now, that debt has been mostly U.S. treasuries.

    But how much confidence would you have in a Fed note backed by a loan to Taxi Bob in Sacremento and his ability to make his mortgage payment?

  15. David Kern commented on Mar 19

    Looks like the BOTTOM to me!

  16. rexl commented on Mar 19

    looks like we’re going subterranean.

  17. Max commented on Mar 19

    I am sceptical of nationalizing regional problems. California looks bad, Michigan looks bad, and Florida looks bad, but the great spaces in between look mostly OK.

  18. Mr. Obvious commented on Mar 19

    Winston, I agree. If the Fed’s balance sheet does trully become littered with junk, then their “notes,” i.e., our cash, trully becomes monopoly play money. I guess this is the hyper-inflation senario.

  19. TKL commented on Mar 19

    Hey BR, there’s a mistake in the charts, as others have noted. I think you’re showing two permits charts, not two starts charts as someone else guessed. Starts haven’t fallen below a million SAAR yet. I wish they had continued plunging to the 700k-900k level that signified a bottom in the past, but they haven’t. They’ve been stable at around 1M for several months now. Looking forward to having all those additional homes on the market.

  20. JustinTheSkeptic commented on Mar 19

    Winston, I’m under the impression that the FED is taking the good stuff, if there is such a thing. If that is the case, how sound exactly are the banks balance sheets? Listening to the snake-selling gurus on CNBC, makes one think otherwise.

  21. Winston Munn commented on Mar 19


    This recent Bloomberg excerpt helps:

    ““Even after downgrading almost 10,000 sub-prime-mortgage bonds, Standard & Poor’s and Moody’s Investors Service haven’t cut the ones that matter most: AAA securities that are the mainstays of bank and insurance company investments.

    In fact, an estimated US$120 billion in sub-prime bonds – still rated AAA by the agencies – DO NOT meet the standard for such top ratings.

    In fact, some of this AAA-rated debt has fallen as low as 61-cents on the dollar amid record home foreclosures and sky-rocketing default rates among similar bonds. According to one hedge fund manager interviewed by Bloomberg, ‘Downgrades of AAA and AA bonds are imminent, and they’re going to be significant.’

    A look inside one of these bonds tells a frightening tale. A US$80 billion sub-prime asset-backed bond issued by Deutsche Bank in 2005 is still rated AAA by S&P and Moody’s. Yet, 18% of the mortgage loans in the security are in foreclosure.

    Additionally, lenders have already seized 15% of the properties underlying the loan values for this security. Another 10% have been delinquent for more than 90-days.

    Another Morgan Stanley Capital sub-prime mortgage-backed security has credit support of 64% relative to the number of delinquent mortgages loans in the pool. But the credit should be at least twice the delinquent mortgages to maintain a top rating.”

    So who will downgrade these AAA ratings when they are on the Fed’s balance sheet?

    Looks like a collasal shell game of “Hide the Asset’s Real Value”.

  22. shoeless commented on Mar 19


    Better shift these assets to the FED before the downgrade. Downgrades will have to come after March 27.

  23. David commented on Mar 19

    The decrease in housing starts is offset, considerably, by the record level of cancellations. This means that the decrease in inventory is much slower than implied by this report. I’m guessing that we’ll be stuck with high inventory numbers for a while.

    Read Calculated Risk for more (

  24. eh commented on Mar 19

    Good news for whom? The builders have to build and sell houses in order to make money. There are a lot of Yuns out there, apparently.

    The industrial homebuilding of the last few years is dead for another few years, at least. And good riddance.

  25. PeakOiler commented on Mar 19

    People aware of Peak Oil (and Peak Natural gas, and Peak Food, etc.) can only see this drops as good for everyone eventually, as energy-inefficient suburban/exurban McMansions, whose dwellers need to make long commutes for everything, will become traps for them.

  26. RPB commented on Mar 20

    Hey B-Dog,

    Make sure to post the inventory and new home sales graphs next time too. Those will really blow your socks off. Especially given the double entente of building AND foreclosure adding to the stock of homes.

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