Plans for constructing new homes in the United States fell to its lowest level on record in November, as the annualized pace of building plans dropped well beyond expectations with a near-20% decline in a single month.
U.S. housing starts plummeted to an annualized pace of 625,000, representing a month-over-month decrease of 18.9%, according to data released from the U.S. Department of Commerce on Tuesday morning. The drop pushes the number of starts to its lowest level ever in the index, which dates back to 1964.
"This is mind-bogglingly awful," commented chief U.S. economist Ian Shepherdson from HFE. "The only consolation here is that unless sales drop much further from their already fantastically-depressed level, the pace of new construction is so low that inventory will fall quickly."
However, John Herrmann, president of Herrmann Forecasting, said the chances of a near-term recovery in housing are slim, suggesting that construction will continue to pull down economic growth for many months. "Despite the rapid plunge in housing starts, we expect residential construction to subtract from real GDP growth over the first three quarters of 2009," he said.
Single-family homes - the most important component in the report, accounting for four-fifths of housing starts - fell 16.9% to 441,000. Single-family units have been falling for 18 of the past 19 months.
Multiple-family homes fared even worse, falling 23.3% to an annualized pace of 184,000 compared to the previous month's 240k level.
"Housing starts and building permits were shockingly weak in November and we do not use that term lightly," added John Ryding and Conrad DeQuadros from RDQ. They noted that housing has fallen by 1.65 million units since peaking in January 2006. "Housing starts cannot continue to decline at this rate for long .. because you cannot build fewer than zero homes!"
Building permits - which gauge future plans for constructing new homes - point towards further deterioration to come. The index tumbled 15.6% to an annualized pace of 616k in November, a record low in an index dating back nearly five decades. The consensus expectation from economists was for 700k permits.
The report confirms the pessimistic index of home builder sentiment released by the National Association of Home Builders on Monday, which showed that participants' outlook was at the least hopeful levels ever.
By Patrick McGee and edited by Stephen Huebl
©CEP News Ltd. 2008