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Economy in Brief

U.S. Housing Downdraft Intensifies
by Tom Moeller December 16, 2008

Housing starts fell even further last month. The level of 625,000 units (SAAR) was the lowest in the series' history which dates back to 1959. It followed a downwardly revised October figure of 771,000. Consensus expectations had been for November starts of 735,000.

Perhaps more indicative of the bleeding in the housing sector was that the speed of the decline in starts during the last three months accelerated to a 71.3% annual rate. That is nearly double the rates of earlier this year and it is nearly triple the rate of 2007.

Starts of single-family homes fell a whopping 16.9% m/m to 441,000 from an unrevised October level. The latest level also was a record low and it is down by three-quarters since the peak in early 2006. The latest was the lowest level since the 1981-82 recession. During the last three months, the rate of decline picked up to -73.6%, also twice as fast as earlier in 2008 and triple 2007. Permits to build single-family homes also were quite weak and fell by roughly the same 12.3% (-46.3% y/y) as during October.

During 4Q starts are down 19.4% from the 3Q average and in the last ten years there has been an 84% correlation between the q/q change in single-family starts and their contribution to quarterly GDP growth.

October multi-family starts fell 26.3% from October and they are down by one-half from last year.

By region, November starts of single-family units in the Northeast fell 42.1% m/m and by 59.8% y/y. In the Midwest, starts fell 12.9% (-41.7% y/y) and in the South single-family starts fell 13.6% (-45.7% y/y). Finally, starts in the West starts fell 15.5% (-43.4% y/y).

Housing Starts (000s, SAAR) November October September Y/Y 2007 2006 2005
Total 625 771 824 -47.0% 1,341 1,812 2,073
Single-Family 441 531 551 -46.0 1,034 1,474 1,719
Multi-Family 184 240 273 -49.3 307 338 354
Building Permits 616 730 805 -48.1 1,389 1,844 2,160
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