Single family construction spending fell 6.6% in November from October which is the largest monthly decline in nearly a year. The pace of decline will now ebb after homebuilders have adjusted production to the now lower demand outlook in 2009. Some of the spending reductions were involuntary. Many homebuilders in Florida and the Southwest have reported they have been forced to stop projects underway and postpone new projects. They have lost their credit line from lenders either frantically reducing their exposure to residential markets or conserving scarce capital to preserve their own solvency.

The recent 100 basis point drop in fixed mortgage from the FRB’s purchase of illiquid mortgage assets is positive for home-buying but not enough to offset the negative impact of heightened concern about income security during the recession. The recession has proceeded far enough that the number of households has stopped growing, perhaps even declined a little. Jobless immigrants are leaving the US and jobless young adults are moving in with each other or their parents.

U.S. Residential Building Construction
(thousands of units)

(1) Monthly figures are seasonally adjusted at annual rates (SAAR figures).
(2) Based on a survey of homebuilders; excludes homes built under contract and multi-family rental units).
Actuals: U.S. Department of Commerce, National Association of Realtors, Freddie Mac.
Forecasts and table: Reed Construction Data.
Mfg. home shipment data for Aug. and Sept.