U.S. Housing Starts At Record Low

The pace of the downturn in the U.S. housing market accelerated at the end of last year. Housing starts fell to a record low in December of 550,000 units (SAAR) which was the lowest in the series' history that extends back to 1959. November starts were revised slightly higher and Consensus expectations for December were for 608,000 starts.

Not only were the latest figures at their historic low but the rate of decline had been accelerating all year to the point where starts during 4Q were one quarter below the 3Q level. That is more than double the 3Q rate of decline and also the fastest on record.

Starts of single-family homes fell to their record low of 398,000 from an upwardly revised November. The level is down by three-quarters since the peak in early 2006. During the last three months, the annual rate of decline reached 72.8%. Permits to build single-family homes also fell to their record low, off by nearly one-third during the last three months. 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.

Starts of multi-family homes fell 20.4% in November alone to their lowest level since early-1994. They are down by one-third since December 2007.

By region, December starts of single-family units in the Midwest were the weakest last month. They were off by more than one-quarter from November and by nearly fifty percent year-to-year. Starts in the West fell 22.7% from November and they were also down by one-half from December of 2007. In the South starts fell by a lesser 9.7% during December. They too were off by one-half from their December 2007 level. In the Northeast starts actually posted a slight uptick during December but they were down by one-third from the year ago level.

Economic Outlook Symposium: Summary of 2008 results and forecasts for 2009 from the Federal Reserve Bank of Chicago can be found here.