For 2009, new construction falls to post-war low of 554,000 homes
By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) - Capping the worst year for housing since the end of World War II, U.S. housing starts fell 4% to a seasonally adjusted annual rate of 557,000 in December, the Commerce Department estimated Wednesday.
For all of 2009, an estimated 554,000 homes were started, down 39% from 2008's total and the lowest on record. Starts of single-family homes dropped 29% to a record-low 444,000 in 2009.
Housing starts of single-family homes, condos and apartments have been essentially flat over the past year, dipping one month only to rise the next. Compared with December 2008, starts are up 0.2%, the first year-over-year gain since early 2006.
Starts are down about 75% from the peak in 2006.
The December estimate of 557,000 was better than the 540,000 rate expected by the median forecast of economists surveyed by MarketWatch. November's starts pace was revised higher to 580,000 from 574,000.
The industry has slashed production of new homes to work off a massive inventory of unsold homes. As of November, the number of new homes on the market had fallen about 60% to just 235,000, the fewest since 1971.
Builders remain very pessimistic about a recovery, despite a generous tax subsidy for buyers. In January, the home builders' sentiment index dropped back to 15 from 16 in January.
The adjustment in home building isn't over yet. The number of homes under construction fell 4% in December to a seasonally adjusted annual rate of 511,000, a record low.
For all of 2009, the number of homes completed fell 29% to 796,000, also a record low.
Details of the December report showed a stronger rebound in the housing market, however. The number of building permits rose 10.9% to a seasonally adjusted annual rate of 653,000, far above the level of starts and the highest in 14 months.
In December, building permits for single-family homes rose 8.3% to a seasonally adjusted annual rate of 508,000, the highest in 15 months. Many economists consider the single-family permits figure to be the most reliable and important number in the release.
Over time, permits and starts are highly correlated.
Permits are less affected by unseasonable weather than starts are. This December was one of the coldest and wettest on record.
The government cautions that its monthly housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can't be sure whether starts increased or decreased. In December, for instance, the standard error for starts was plus or minus 9.3%. Large revisions are common.
The standard error for monthly building permits data is much lower at plus or minus 2.4%.
It can take four months for a new trend in housing starts to emerge from the data. In the past four months, housing starts have averaged 562,000 annualized, down from 568,000 in the four months ending in November.
