Total U.S. housing starts in January 2008 continued at a woefully low level of only 1.012 million units (seasonally adjusted at an annual rate). This was little changed from December’s figure of 1.004 million. However, both months were down about 56% versus January 2006 (2.292 million), which was the peak month for housing starts in this latest cycle.

Building permits were about the same level as starts in January, but completions continued to run quite a bit higher (1.351 million). The gap between completions and starts will add to unsold inventory. This means that the weakness in starts is likely to continue for some time.

The biggest problem for the housing sector is the extraordinary volume of unsold inventory that needs to be worked off. The current 9.6 number-of-months supply is more than double the figure that would indicate a good supply-demand balance in the marketplace.

Reed Construction Data is forecasting that total U.S. housing starts in 2008 will be 1.100 million units. In 2007, the level of starts was 1.354 million. This level will be approached again in 2009, with a projected figure of 1.336 million.

Alex Carrick

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