Plunge in U.S. Housing Starts Nearly 50%
Alex Carrick
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Seed Newsvine |
From a peak level of 2.292 million units of housing starts in January 2006 to their current level of 1.187 million units in November 2007, U.S. housing starts have plunged by 48%. (These figures are seasonally adjusted monthly numbers, bumped up to annual rates.) U.S. housing starts began a cyclical slide well in advance of the subprime mortgage crisis, but that added problem has prolonged and deepened the misery.
The inventory of unsold new homes has hovered around 9.0 months for the past four months. This is more than double the figure that would indicate a good demand-supply balance in the marketplace. The number-of-months supply of existing homes for sale is over 10 months.
Now for the Good News
Now for the good news. Sales of existing homes are showing signs of stabilizing. They were actually up slightly month-to-month in November (5.00 million versus 4.98 million in October). In the new housing market, the number of unsold new homes has been on the decline since the midway point of 2006.
Affordability is the key factor that will eventually save U.S. housing markets. House prices, new and existing, have fallen somewhere between -1% and -5% on a national basis and the adjustment has been much greater in some regional markets. At the same time, employment growth has remained positive, although less vigorous than earlier in the cycle. The job gains, combined with wage gains, have meant solid income growth. Many U.S. families are in a position to make bargain housing purchases.
An International Component
There is also an international component to U.S. housing markets. With the decline in value of the U.S. dollar, real estate assets have dropped in price for many foreign investors. The dollar effect on top of the housing-price effect are stimulating Latin American, European and Canadian interest in resort properties in Nevada, Florida and other warm climate or ski resort areas of the U.S.
