U.S. Housing Starts (458,000 units) at their Lowest Point So Far

The April 2009 housing starts number for the United States was a continuation of the bad news in the residential sector that extends back several years. Singles (+2.8%) increased month to month, but multiples plummeted by almost 50%. Multiple-unit starts are a more volatile series. Multi-unit starts in April of this year were -72% versus April of last year. The net effect yielded total unit starts of only 458,000 in the latest month (SAAR), the lowest point so far and -80% versus the January 2006 peak of 2.273 million.   

Part of the problem in the multiples market is lining up credit for the retail and office space that often accompanies new apartment and condominium developments. Tighter credit remains a problem for both prospective homeowners and new condo developers. It also has to be remembered that the ongoing troubles in labour markets are going to have a spillover effect in the housing sector. The month-to-month employment decline in the U.S. in April (-539,000 jobs) was less than in March (-700,000), but it was still a sobering and somber performance.

Canada’s Non-residential Building Construction Costs Fall 4.2% Q/Q

In Canada, housing starts fell to only 117,000 units in April, a decline of 60% from their cyclical peak. However, it is not just the residential segment that is in difficulty. The problems in the non-residential building category have just shown up in the latest construction cost index numbers released by Statistics Canada, for first-quarter 2009.

Statcan’s cost index is based on five building models in the three major type-of-structure categories, commercial, industrial and institutional. General and specialty trade contractors are surveyed. The biggest moderations came as a result of material cost declines in general and weaker market conditions, particularly in western Canada.

The overall Canada index figure was -4.2% on a quarter-to-quarter basis. Vancouver (-10.7%) led the declines, while Montréal had the only increase among seven major cities. On a year-over-year basis, the Canada-wide change was +1.0%. Again, cities in the West led the declines, with Vancouver (-9.1%) and Edmonton (-4.7%) as the frontrunners.

Everyone wants to see an improvement in the numbers. But the turnaround will come in incremental stages, with a step or two forward matched by a step or two backwards for several more months. What is the conclusion to be reached from all of this? Government infrastructure spending support in both the U.S. and Canada cannot come fast enough. 

U.S. Monthly Housing Starts
(seasonally adjusted at annual rates)

United States' annual starts:
2005 = 2.068 million units (+5.7%);
2006 = 1.801 million units (-12.9%);
2007 = 1.355 million units (-24.8%);
2008 = 0.906 million units (-33.1%).
Jan-Apr average 2008 = 1.044 million units;
Jan-Apr average 2009 = 0.511 million units (-51.0%).

U.S. Regional Housing Starts

Northeast

U.S. Northeast annual starts:
2007 = 142,900 units;
2008 = 121,000 units (-15.3%).
Jan-Apr average 2008 = 117,000 units;
Jan-Apr average 2009 = 55,500 units (-52.6%).

Midwest

U.S. Midwest annual starts:
2007 = 210,100 units;
2008 = 134,900 units (-35.8%).
Jan-Apr average 2008 = 152,500 units;
Jan-Apr average 2009 = 81,500 units (-46.6%).

South

U.S. South annual starts:
2007 = 681,100 units;
2008 = 453,400 units (-33.4%).
Jan-Apr average 2008 = 535,500 units;
Jan-Apr average 2009 = 263,000 units (-50.9%).

West

U.S. West annual starts:
2007 = 320,900 units;
2008 = 196,200 units (-38.9%).
Jan-Apr average 2008 = 239,300 units;
Jan-Apr average 2009 = 111,300 units (-53.5%).

Data source: U.S. Census Bureau (Department of Commerce).
Chart: Reed Construction Data – CanaData.