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Economy in Brief

U.S. Housing Starts Fall to Second Lowest Level on Record But Bottom May Be Forming
by Tom Moeller April 16, 2009

The breather in the housing market downturn proved short-lived as housing starts fell to the second lowest level on record. The Commerce Department indicated that total housing starts in March reversed nearly all of their February gain and fell 10.8% to 510,000. The February level was revised down slightly and the latest figure compares to Consensus expectations for 550,000 starts.

The reversal occurred as starts of multi-family homes fell 29.0% to 152,000 after a downwardly revised 62.1% February increase. The latest levels are the lowest since the early 1990s.

Despite these latest declines, a bottom in the housing market seems to be forming. Starts of single-family homes were unchanged last month at 358,000 after a slight uptick in February. Nevertheless, they remained near the record low for the series which dates back to 1959. The latest level is down eighty percent since the peak in early 2006. During 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.

By region, starts of single-family units in the Northeast roughly repeated their February gain and rose 30.6% (-29.9% y/y). Starts in the Midwest ticked up a lesser 3.6% (-47.2% y/y) after their sharp 17.0% February recovery but in the South, single-family starts were quite weak. They fell to a new record low (-49.7% y/y). In the West, starts also were depressed as their 3.3% uptick (-59.6% y/y) followed a 25.6% February decline. Starts here have fallen 87.3% from their 2005 peak.

The latest figures covering permits to build single-family homes, a leading indicator of starts, also suggest that a bottom in housing activity may be forming. Though they fell 7.4% last month, that followed a 16.1% rise in February and permits roughly equal the December level.

The housing starts figures can be found in Haver's USECON database.

The Fed's latest Beige Book covering regional economic conditions can be found here.

Housing Starts (000s, SAAR) March February January Y/Y 2008 2007 2006
Total 510 572 488 -48.4% 903 1,341 1,812
Single-Family 358 358 356 -49.6 617 1,034 1,474
Multi-Family 152 214 132 -45.1 286 307 338
Building Permits 513 564 531 -45.0 880 1,389 1,844
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