March's Level at 947,000 units is the Lowest Since 1991
This week's report on U.S. housing starts from the Census Bureau pegged the March 2008 level at only 947,000 units, seasonally adjusted at an annual rate. This is the first time U.S. housing starts have dropped below one million units since seventeen years ago in May 1991. The decline from the latest peak level of housing starts in January 2006, at 2.3 million units, to the present level has been 58.7% (or nearly 60%).

Nor is there much "sunshine" to be taken from the other two key measures of housing markets that are published along with the starts. Completions in March were 1.216 million units. Since sales were still on a downward path in February, the inventory of unsold units is likely to keep on rising. The current level of unsold inventory is 9.8 months, as the measure of vacant new units divided by the latest monthly sales rate.

Also, residential building permit authorizations, which are a month-or-two-ahead leading indicator for starts, were only 927,000 units in March.

Regionally, the Northeast and Midwest are in Trouble
Regionally, the most apparent problems (from the accompanying graphs) are in the Northeast and the Midwest − they are both still trending down. Housing starts in the South and the West have been relatively stable in the first three months of this year. This is a reversal of fortunes versus earlier in this downturn. In 2006 and 2007, the South and the West bore the brunt of the declines in housing starts, because they were the victims of speculation and inflated real estate prices.

The factors affecting the Northeast and the Midwest are after-effects. The Northeast is now in shock due to fallout from the subprime mortgage collapse. Subsequent liquidity problems have seriously damaged the large financial services sector that provides a great deal of employment in the region. The Midwest is suffering from more normal cyclical factors. The general slowdown in the economy is cutting into demand for the products of traditional manufacturing, which is based around the Great Lakes.