Home affordability is at the housing boom level but permits, starts and sales continue to decline because prospective homebuyers either lack access to credit or the confidence to buy.

The recent drop in 30-Year fixed mortgage rates to near 5% will cushion the decline in housing but is not enough to stop it. That will take an end to declining home prices and much improved confidence about income security. Neither is likely in the next few months.

The unexpectedly large November drop in housing permits and starts probably reflects in part the loss of credit by homebuilders and developers which forced them to cease building.

Key Indicators of the U.S. Market Environment — Dec 2008
Residential Construction (New and Remodeling)

	Year Ago	Previous Month or Qtr.	Latest		Level	Recent Trend	Impact on Const.
New Residential
Affordability − 30-Year mortgage index (NAR)	119.2	135.2	Oct	141.8	High	Rising
Affordability − 1-Year ARM mortgage index (NAR)	121.0	141	Oct	142.9	High	Rising
Consumer income growth, % change y/y (U.S. Commerce Dept.)	5.6	0.2	Oct	-0.4	High	Falling
Consumer real income growth, % change y/y (U.S. Commerce Dept.)	3.2	-9.2	Oct	-10.4	High	Falling
Employment change, 000s (U.S. Labor Dept.)	60	-320	Nov	-533	Low	Falling
Household net worth, % change y/y (FRB)	8.8	-0.7	Q2	-3.5	Average	Falling
30-Year fixed mortgage rate, % level (Freddie Mac)	6.10	6.14	W/E Dec 18th	5.17	Low	Falling
1-Year ARM mortgage rate, % level (Freddie Mac)	5.5	5.33	W/E Dec 18th	5.09	Low	Falling
Consumer confidence index (The Conference Board)	87.8	38.8	Nov	44.9	Low	Rising
Housing market index (NAHB)	19	9	Dec	9	Low	Steady
Homes under construction, 000s (U.S. Census Bureau)	1,077	881	Nov	857	Low	Falling
New home inventory, number-of-months supply (U.S. Census Bureau)	8.6	10.9	Oct	11.1	High	Rising
Existing home inventory, number-of-months supply (NAR)	10.5	10	Oct	10.2	High	Rising
Residential Remodeling
Existing home sales, 000s (NAR)	5,060	5,140	Oct	4,980	Low	Steady
Building supply store sales, seasonally adj. $ millions (U.S. Census Bureau)	28,005	26,905	Nov	26,587	Low	Falling
Wood product shipments, seasonally adj. $ millions (U.S. Census Bureau)	8,402	7,963	Oct	8,050	Low	Falling
Remodeling contractor hours worked, % change y/y (U.S. Labor Dept.)	-10.1	-5.8	Oct	-5.2	Low	Falling
Mortgage refinancing applications, index (Mortgage Banking Association)	2,127	1,281	W/E Dec 12th	4,156	High	Rising

Abbreviations: y/y = year over year; WE = week ending; ARM = adjustable-rate mortgage;
NAR = National Association of Realtors; FRB = Federal Reserve Board;
NAHB = National Association of Home Builders.
Table: Reed Construction Data and Reed Construction Data - CanaData.