Privately owned housing starts fell to a seasonally adjusted annual rate of 817,000 in September, according to the U.S. Commerce Department report on new residential construction. The rate was down 6.3 percent from August's revised reading of 872,000 and 31 percent lower than September 2007. Building permits also sank.
Housing starts have fallen by nearly two-thirds from their peak of 2.3 million in January 2006, and were at the lowest annual pace since January 1991.
New construction of single-family homes - which make up a good chunk of the housing market - were at a rate of 544,000, or 12 percent below August's number. Single-family housing starts have fallen 70 percent since their peak in January 2006, and have not been at such a low a rate since February 1982.
Applications for building permits, considered a reliable sign of future construction activity, fell to a seasonally adjusted annual rate of 786,000 last month. That's 8.3 percent below the revised 857,000 rate in August, and the lowest level for permits since November 1981.
NAR's take
The National Association of Realtors (NAR), meanwhile, counts 4.26 million existing homes up for sale at the end of August - equivalent to a supply of roughly 10.4 months at the current sales pace. The trade group, which typically projects a rosier outlook on housing stats, explains that "supply and demand in the housing market is considered balanced when the inventory settles at about six months."
While many builders have put the breaks on constructing new homes, I don't think this is a negative sign. Don't get me wrong, I think it's horrible that developers and home builders have started laying off huge sections of their work force due to the housing downturn. My best friend's brother, who works for a home builder here in Chicago, got the pink slip last week. He was told by his company that they were suspending production of new projects for the next three months, and by the end of October there would be no work until further notice. Mike is the sole financial provider for his family, and with the holidays right around the corner, he doesn't know what to do. It's not like there are many jobs open for guys like Mike who do residential construction.
The reality that many builders face today is one of a bloated housing market, which was fueled by their excessive development during the housing frenzy. And until the abnormally high levels of inventory subside, the number of new construction homes will remain stuck in the cellar.
Got hot local housing tips or a story you want to share? Contact Amy Le at openingdoorsblog@homescape.com.
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