According to the latest report from the U.S. Census Bureau, monthly housing starts across the nation fell below the one-million-unit mark (seasonally adjusted at an annual rate) for the third time this year. In July 2008, the level of starts was only 965,000 units. This was the lowest number so far in this century. It marks a decline of nearly 60% from the most recent peak level of 2.273 million units in January 2006.

The current situation is the consequence of the subprime mortgage fiasco, an excess of unsold inventories and a collapse in home prices. A weakening labor market and no more wiggle room on interest rates, since inflation is so high (+5.6% year over year), are prolonging the agony.

Starts in the West the Weakest; Northeast Performing Relatively Best
The monthly average of starts through the first seven months of this year is -28.9% for the United States as a whole. Regionally, the West (-36.7%) and the Midwest (-31.0%) have performed worse than the country overall, in terms of average monthly starts so far this year versus the same period last year. The Northeast (-5.5%) has done relatively much better and the South (-29.3%) is about on a par with the nation as a whole.

Simply eyeballing the regional charts that accompany this report, the West appears to be still on a downward path. The South may still be on a declining path as well, although not at as sharp an angle. The Midwest appears to have flattened out at a low level and the Northeast has had a big jump in starts as a result of building code changes in New York City (i.e., a “bringing forward” of projects before the deadline).

The Multiples Market Provides a Ray of Sunshine
It has been the singles market that has been particularly devastated. Year-to-date singles, on average, are -39.6% January to July 2008 versus January to July 2007. On the same comparison basis, multiple unit starts are actually +12.5%, providing one of the few snippets of good news with respect to U.S. housing markets.

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