Single-family building permits fall 12.3% to 27-year low
WASHINGTON (MarketWatch) - U.S. home builders threw in the towel in November, slashing construction of new homes far below the worst levels seen in 50 years, according to Commerce Department data released Tuesday.
New starts dropped an eye-popping 18.9% to a seasonally adjusted annual rate of 625,000, the lowest rate since the Commerce Department began keeping records in 1959. According to similar records kept elsewhere, it's the lowest pace of construction in the post-war period.
Starts were far lower than the 740,000 expected by economists surveyed by MarketWatch. The monthly percentage drop was the most since a 26% decline in March 1984.
Starts in September and October were revised lower. In October, starts were revised to a record-low annual rate of 771,000 from 791,000 previously.
Building permits, a separate, less-volatile measure of new construction, fell 15.6% in November to a seasonally adjusted annual rate of 616,000, also a record low. Permits for single-family homes, considered by many analysts to be the key number in the report, fell 12.3% to a seasonally adjusted annual rate of 412,000, a 27-year low.
Starts of single-family homes dropped 16.9% to an annual rate of 441,000, also a record low.
Housing starts have now fallen 47% in the past year. Building permits are down 48%.
Builders are frantically cutting back their production of new homes, trying to work off a mammoth glut of unsold inventory. The more builders cut production, the sooner the market can recover.
The number of homes completed in November rose 3.3% to an annual rate of 1.08 million. The number of homes under construction fell 2.7% to an annual rate of 857,000.
The report shows new construction has been battered again by the credit squeeze in capital markets, which have dried up financing just as the economic downturn accelerated and pushed demand lower. Rising numbers of foreclosures of existing homes are competing against new construction for the few buyers remaining.
On Monday, the National Association of Home Builders said its builder sentiment index remained at a record low level in December, signaling continued weakness in construction. See full story.
The government cautions that its monthly housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can't be sure whether starts increased or decreased. In November, the standard error for starts was plus or minus 8.9%. Large revisions are common.
It can take four months for a new trend in housing starts to emerge from the data. In the past four months, housing starts have averaged 769,000 annualized, down from 1.27 million in the four months ending last November.
In all of 2007, 1.355 million homes were started.
