The U.S. housing market is well-captured in the three graphs that accompany this report. Success, if you want to call it that, has been achieved over the past year-and-a-half in lowering the number of unsold homes. The number of unsold single-family homes in the U.S. was -2.2% on a month-to-month basis and -10.1% on a year-over-year basis in January 2008.

The problem, however, has been with respect to sales, which are down even more. Sales of new single-family homes were -2.8% month to month and -33.9% year over year in the latest month. As a result, the number-of-months inventory (i.e., number of unsold homes divided by the monthly sales rate) has kept on climbing. It now stands at 9.9 months. Prior to the start of the housing sector's difficulties in early 2006, the inventory figure was around 4.0 months. The inventory of existing homes for sale is also around 10 months.

The excess stock has resulted in a severe cutback in new home starts. U.S. housing starts (singles plus multiples) in the last two months have barely stayed above the one-million-unit mark.. They are down 56% versus their peak level in January 2006. (Single-family starts are at their lowest level since 1991.) How can there not be concerns about the possibility of a recession in the overall economy when housing starts are less than half of what they were two years ago?

Regional Starts in Rough Shape
Furthermore, in all four major geographic regions, the January 2008 level of housing starts was down from what were quite weak levels in January 2007. The West region (-39.6%) was off the most, followed by the Northeast (-33.0%), the South (-24.2%) and the Midwest (-16.3%).

Reed Construction Data's latest housing start forecasts are included in the table at the end of the story entitled Construction Spending Forecast Now Weaker in Market Insights on this website.