Housing Starts Plunge 30.6%

Does this look like a bottom to you ?


chart courtesy of Barron’s Econoday


The Commerce Department released the Housing Starts data. It was not pretty

Construction of single-family houses in April dropped to the
lowest level in 17 years. Builders broke ground on 692,000 single
units at an annual rate, the fewest since January 1991.

Multiifamily units — Condos, townhouses, and apartments — rebounded for the month. Total housing starts were up 8.2% since last month, but plummeted 30.6% below the level of construction in April 2007.


Builders have been reluctant to build because demand for new homes has
plunged and the supply of unsold property remained high. The latest
data show new-home sales, for March, were down 36.6% from a year
earlier. On Thursday, the National Association of Home Builders
reported its index for sales of new, single-family homes slipped to 19
in May from 20. The gauge is based on a survey of builders asked about
prospects for sales.

The overall WSJ article was good, despite the WTF headline: Housing Starts Post Surprise Rise. Bloomberg seemed to find a better balance int heir header: Housing Starts in U.S. Rise; Single-Family Construction Hits 17-Year Low.

Given the huge inventory overhang, weak housing starts is (perversely) a positive for the housing market!


Manufacturing and Construction Division
U.S. Census Bureau, MAY 16, 2008 AT 8:30 A.M. EDT

Housing Starts Post Surprise Rise 
JEFF BATER May 16, 2008
WSJ, 9:51 a.m. 

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What's been said:

Discussions found on the web:
  1. Donny commented on May 16

    Hey Barry … did you hear “Consumer confidence tumbled to its lowest in 28 years!”

    This is without doubt another “Bottom” indicator that the recession is already behind us. Cheers!

  2. mazzolata commented on May 16

    Yes, it is the bottom clueless.

  3. Barry Ritholtz commented on May 16


    You remind me of a girlfriend I broke up with in High School that stalked me.

    Listen, its not you, its me. We tried it, and it just didn’t work out. You need to move on with your life, and start dating other websites.

    I feel feel kinda bad for you, but really, its time for you to grow up and move on with your life.

    I’m bored of having you as my bitch. You just weren’t that good.

  4. bluestatedon commented on May 16

    The Commerce Dept. and Reuters have a different take (via MSN.money):

    April housing starts rise best since Jan 06
    May 16, 2008 9:10 AM ET

    WASHINGTON (Reuters) – Construction starts on new U.S. homes rose by a surprisingly strong 8.2 percent in April and applications for new building permits turned up for the first time in five months, the Commerce Department said on Friday in a report showing the hard-hit housing sector still had some spring vigor.

  5. Steve Barry commented on May 16

    CNBC calls the report, the bright spot of the day…starts up 8%!!! They just called the number “AMAZING”

    Can anyone with a straight face say CNBC is not cheerleading the market? Barry, you should call them up right now and offer to come on with the truth about the AMAZING number. Someone pleasedo so!!

  6. Barry Ritholtz commented on May 16


    They do not have a different take on the numbers — rather, they are only reporting half of them.

    Unlike the Commerce Dept, or media stenographers, I mention both the monthly and annual data above :

    “Total housing starts were up 8.2% since last month, but plummeted 30.6% below the level of construction in April 2007.”

  7. michael schumacher commented on May 16

    sure it’s the bottom if you are a buy-side analyst that constantly ignores reality on a daily basis. Suckering people into buying is what this is all about. Without several billions daily (thrown at the market) we would actually be on our way to seeing one.

    Oh wait this could be on the other thread too.


    That’s the kind of response you should be giving on TV…not the “nice guy” approach.


  8. Quonk commented on May 16

    …a clear sign that statistics can be selectively presented to support one’s views. CNBC trumpets that starts are up 8%…month over month…but barely mentions the year over year thumping. Your chart shows the trend…which is more meaningful to me than a one month jump in a spastic government number. Of course, the market itself will inform us, but I wouldn’t be too cheery in light of the stunning battlefield reports from San Diego, Lost Wages, and Florida.

  9. NotAPro commented on May 16

    Anyone want to buy a house in RTP? :)

    Thankfully we planned for the house not to sell for a while.

    There are about 10 houses for sale in our subdivision, yet Toll Brothers is developing a parcel of land about 1.5 miles from me for “luxury” houses.

  10. Phil Izzo commented on May 16

    Economists and others weigh in on the unexpected 8.2% increase in housing starts last month.

    # The headline increase in starts means nothing; it is all due to a rebound in the hugely volatile, but essentially trendless, multi-family sector, where starts plunged 35.1% in March and then jumped 36.0% in April. Almost every time multi-family starts drop sharply they rebound the next month; we don’t understand why the consensus view failed to take this into account. Much more important is the single-family sector, where starts dipped 1.7% to a new low of 0.692M. Single-family permits rose 4.0%, though, the first increase since March last year. One good month is not a recovery though, especially given Easter seasonal problems. Listen to the builders; NAHB [National Association of Home Builders] survey yesterday was hideous. –Ian Shepherdson, High Frequency Economics

    # Single family starts stood at 692,000 in April. Outside of a single month during the 1990-91 recession, this represents the low point since the 1981-82 housing market collapse… The inventory of unsold new single-family homes now stands at 470,00. A more normal level is around 350,000. Given current trends in new construction and sales, we estimate that it may take up to a year to achieve equilibrium — but, at least things are moving in the right direction. –David Greenlaw, Morgan Stanley

    # The rise in housing starts was entirely a product of the volatile multi-family sector. In the single-family sector, the readings on housing activity were mixed as starts fell a further 1.7% in April, while permits rose 4.0% (the first increase since March 2007). However, it would be premature at this point to read much into the rise in permits. Given the decline in housing starts over the last three months, housing remains on course to be a further significant drag on growth in the second quarter. –Bear Stearns

    # Permits for new single-family building rose for the first time in over two years but the 4% gain simply restored those permits to the February level, which until March had been the lowest in 17 years. The regional pattern of starts was mixed with single family starts rising in the Midwest and West but falling the Northeast and South. In all regions, however, starts remain near historic lows. –David Resler, Nomura Securities

    # Recall that the monthly new home sales data do not account for cancellations which, according to earnings reports from the homebuilding industry, are still running at elevated rates. Thus, new home sales are actually overstated, while inventories of new homes for sale are understated. As such, it could very well be the case that starts are still running ahead of sales, meaning that the process of getting inventories under control has not yet begun. This in part accounts or our surprise at the rise in single family permits in April. –Richard F. Moody, Mission Residential

    # What caught my eye in the report was the fact that there does appear to be a move back into building condo’s and townhouse’s in some areas of the country that still have major problems with backlogs. This is not a positive development and does again cause reason for concern. In particular, in areas of the country such as the South, were there is an extraordinary inventory of condos and townhouses, an increase in starts and permits is a particularly negative development. We would urge our clients to look past the headline increase, which is a function of a very volatile multi-family dwelling, and focus on the continuing decline in starts for single-family residences. –Joseph Brusuelas, Merck Investments

    # Let’s not kid ourselves, the housing market has crashed and burned and this report doesn’t say the situation is good. But for almost two months I have been arguing that the level of housing starts is near the bottom because they had neared historic lows. Consider that over the past fifty years, the rate of starts has been lower than current level in only thirty months. The March pace was the sixteenth lowest over the same time period. And the single-family level was the twenty-fourth lowest. While we may not yet have absolutely hit bottom, it is beginning to look as if the end may be near. That doesn’t mean we should expect home construction to start rebounding. I would simply take some stabilization in the sector. –Naroff Economic Advisors

  11. Ian leNobel commented on May 16

    The talking heads on bubblevision were practically frothing at the mouth when this data point was released. I simply couldn’t fathom where the enthusiasm was coming from; any increase in permits or starts without at least a commensurate increase in sale throughput would be a disaster……and since sales shrinkage is accelerating…..

  12. bsneath commented on May 16

    Possible underlying trends: Housing permits up in midwest and west because of energy, farming and export mfg. Multifamily up because high gas prices are encouraging relocation out of distant suburbs and into urban areas. We will likely see a bifurcated economy where some parts of the USA recover early while others (SoCal, Fla, NV, NYC) suffer a prolonged recession and construction depression.

  13. Innocent Bystander commented on May 16

    Dylan Ratigan is on the floor in Chicago stuttering and sputtering his way around. It looks like his hair is down a quart of oil, and he was trying to buy some, but it was the wrong exchange.

  14. bluestatedon commented on May 16

    “They do not have a different take on the numbers — rather, they are only reporting half of them.”

    BR, I was being uncharacteristically diplomatic with these loons. I’m continually astounded by the mindless dribble coming from supposed “journalists” (even from places like National Useless Radio) who, as you point out, cherry-pick the nice happy shiny numbers and ignore the real picture. I believe that there’s a political aspect to all of this media spin, but I’ll spare everybody the rant.

  15. michael schumacher commented on May 16

    B.F.F.= Bank Failure Friday

    Over/under on how many today? I say 4

    What say you??


  16. bbscap commented on May 16

    I have developed an new version of an old technical tool. The 50 bottom and the 200 bottom moving average. Works for both the stock market and housing market. I’m holding out till we hit the 200 on housing.
    I truly enjoy your work Barry.


  17. TheUnrepentantGunner commented on May 16

    Question for people who know this industry better than me:

    Is this a sign that the homebuilders are deploying the cash on their balance sheet in to potentially more productive uses with low overhead costs (self-storage being the stereotypical example), or do none of the homebuilders have any cash left to deploy?

  18. Mark W commented on May 16

    The contrast between Barry’s post and the CNBC report does make an interesting contrast. I guess further context is needed to adequately frame the numbers. It may be fair to say that even as alte as last April there were way too many housing starts and that was the last ‘pour into the overflowing bucket’ of an overstuffed housing inventory. It wouldn’t be realistic to assume the housing umbers should be creeping back up to prior levels if we all agree they were indicative of a bubble level. Time is needed for the market to absorb the over supply and stabilize.

    On the flip side of the coin month to month increases mean little without seasonal adjustments to account for the nomral starts increase due to better weather. There will always be more strats in the springtime.

    Point is, it may or may not be near a bottom, but niether data points by themselves would be adequate inidicators of those positions by themselves. JMHO.

  19. Curt at PennyJobs.com commented on May 16

    Maybe its time to plant a large garden.

    Why is the Fed, the administration and the congress still pretending everything is all right? When did optimism become a financial strategy for combating bad monetary policy?

    The leadership of our nation better wake up and smell the inflation that is spreading like wild fire.

    This is starting to look like the beginning of a global Great Depression.

  20. johnnyvee commented on May 16

    This is not a bottom–It’s just the first leg down. Finding comfort that the numbers can compare to the 91-92 recession is premature–the problems are much worse than the U.S. reduction of defense spending back then.

  21. bdg123 commented on May 16

    This is actually good news. Well, it’s good bad news. If we would have had housing starts collapse a long time ago the inventory component to corrections could have been mitigated somewhat.

    It will be interesting to see if starts bottom before prices or vice versa. Although it doesn’t make any sense to anticipate either.

  22. Mr. Beach commented on May 16

    As much as it seems obvious to us on Barry’s blog and others, the message is still lost on the general public.

    I have friends living in exurbs who bought homes in the past few years — homes that are now selling at 20% to 40% discounts — who still will not accept that a housing bubble existed, let alone that it has popped.

    These folks desperately want to believe in the tooth fairy and Goldilocks.

    OTOH, can we blame them? The stock market, arguably, the broadest aggregate of investor sentiment continues to stay aloft.

  23. ac commented on May 16

    Builders are now doing the same thing with condo’s they did with single family homes.

    I mean, those guys just don’t know when to stop.

    The condo market goes tits up but they continue to build them right into the bust. Which deepens and lengthens the bust even more.

  24. Cherry commented on May 16

    LOL. Uh, remember when starts dropped to 1.38 in January 07 and surged up to 1.52 the next month? Same thing happened here. This time from the multi-building sector.

    As ac said, it is the same game all over again. The bust to the condo/multi-family division was slower and started later than the single family side did. They have alot of excess building left in the pipes.

    You should have known that. Shame on you.

  25. Kevin Depew commented on May 16

    Speaking of housing, while everyone is busy congratulating themselves on the better-than-expected housing starts, we’ll look at the actual data in the release instead of the headlines and note the following:

    *While the total housing starts came in at an annualized rate of 1,032,000, 8.2% above March’s revised 954,000 figure, this was 30.6% below the April 2007 rate.

    *Well, one might object, all bottoms have to begin somewhere.

    *Yes, and for housing it will begin with increases in single-family units, the most important datapoint in the release.

    *But looking at this data, single-family housing unit starts in April were actually LOWER than March, 692,000 units versus 704,000.

    *So how did the headline show strength?

    *Multi-family units came in at 340,000 versus 250,000 in March.

    There is nothing about this report that can be construed as positive for real estate and housing.

  26. Francois commented on May 16

    *Housing starts lowest since 1981
    *Consumer confidence lowest since 1982
    *HELOC is now subprime. (Fleck via Calculated Risk)
    *FED TAF and all the alphabet soup doesn’t prop up
    *Food stamps recipients at record high in 40 years.
    *All basic necessities at record high.

    Barry and all posters here,

    I do not have access to the kind of data some of you have available. Or maybe I do not know where to look :-(

    However, it’d be interesting to really know how it is the markets are able to hold like they do with all these completely rotten fundamentals.

    I’m in cash 100% right now, for the simple reason that I cannot make sense of the market behavior at this juncture.

  27. Joe Klein’s conscience commented on May 16

    Curt at PennyJobs.com:
    If “B-52” Ben admitted what was really happening, the economy would be a lot worse than it is now(since reality would hit the Kudlows straight in the face), and McCain and the Republicans would get slaughtered more than they already will this November. Neither Bush nor Bernanke want that. They have to save the GOP somehow.

  28. flenerman commented on May 17

    Since you asked, yes, I can look at the graph and conclude that a bottom may be forming. I see five months of housing starts, averaging about 1M starts per month with April being a little higer than average. It takes six months to indicate a possible bottom? Eight? Ten?

    Having said that, I don’t believe we’ve seen the bottom.

    One factor that I don’t believe has been mentioned—the trumpeted 8.2% increase from March is followed in the Census Bureau release by +/- 14.5%. In other words the reported increase is not statistically significant.

  29. SRQ commented on May 17

    You have to wonder if the growth in multi-family dwellings is due to people moving out of homes they can no longer afford and moving into apartments.

  30. The Big Picture commented on May 17

    Estimated Relative Standard Errors in Housing Data

    Regarding yesterday’s New Home Starts, an emailer writes: You used to discuss the Commerce Dept.’s standard statistical error regularly. In light of that surprising Housing Start number, could you please update that?Sure thing. I love this sort of data…

  31. pft commented on May 18

    The 6 month average curve is incorrect (doctored). The blue line is said to be a 6 month average, yet tops 27 consecutive months data, denoted by the grey bars, and does not intersect a single one, so how can the line be a 6 month average.

    If they drew the line proper you might actually see the approach of a bottom. Guess thats why the changed it.

  32. Barry Ritholtz commented on May 18

    I don’t see how this is doctored at all:

    Its a trailing 6 month average — as such, it should be above a falling market, and below a rising market.

  33. Blackhalo commented on May 21

    “I’m in cash 100% right now, for the simple reason that I cannot make sense of the market behavior at this juncture.”

    I can not think of a worse place to be. Oh wait yes I can, a hedgie holding a mortgage backed security that is getting eaten alive by inflation.

    Even worse for the Mortgage crowd, at some point continuing gas, food and commodity prices will force the Fed to raise rates. Talk about being between a rock and a hard place, facing the devils choice between holding an asset depreciating by inflation or the complete loss of that security to default.

    I figure the Fed will raise the rates just after the votes are in to save as may incumbents as they can. 2010 will be the real year of change.

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