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Economy in Brief

U.S. Housing Starts Lowest Since 1991
by Tom Moeller September 17, 2008

Housing starts fell hard again last month. The 6.2% m/m decline to 895,000 units (SAAR) followed a 12.4% drop during July which was revised slightly deeper. The August level was the lowest since 921,000 starts during January 1991. Consensus expectations had been for 950,000 starts

August starts of single-family homes fell by 1.9% to 630,000 units, also their lowest level since early-1991.

The latest figures suggest that housing this quarter will again subtract from GDP growth. So far in 3Q, single-family starts are down 5.8% from the 2Q average. Starts last quarter fell by 7.2% from 1Q and that decline was accompanied by a 0.6 percentage point subtraction from real GDP growth. For 3Q the subtraction will thus be roughly the same. During the last ten years there has been an 84% correlation between the q/q change in single-family starts and the contribution to quarterly GDP growth.

Multi-family starts have now retraced all of their rise during 2Q. They fell 15.1% last month after the 26.8% drop during July. Thus for 3Q so far, starts are down 17.6% after the 7.5% rise during 2Q.

By region, August starts of single-family units in the Northeast fell 8.6% (-14.7% y/y) following their 11.1% gain during July. The 5.3% m/m decline in the South dropped them 40.4% below the year-ago level. That was also the lowest since early 1991. In the West starts repeated their performance in July and rose 3.5% (-30.7% y/y) while single-family starts in the Midwest also rose by 5.5% (-32.7% y/y).

Building permits fell hard again. They declined 8.9% after a 17.7% plunge during July. Single-family permits repeated their July performance with a 5.1% (-40.3% y/y) decline. That was their lowest level since 1982.

The Fed's statement regarding American International Group (AIG) and the Federal Reserve Bank of New York can be found here.

Housing Starts (000s, SAAR) August July June Y/Y 2007 2006 2005
Total 895 954 1,089 -33.1% 1,341 1,812 2,073
Single-Family 630 642 663 -34.9 1,034 1,474 1,719
Multi-Family 265 312 426 -28.2 307 338 354
Building Permits 854 937 1,138 -36.4 1,389 1,844 2,160
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