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Economy in Brief

U.S. Housing Starts Fell Further in September
by Tom Moeller October 17, 2008

Housing starts fell 6.3% m/m last month to 817,000 units (SAAR). That followed an 8.1% decline during August which was deeper than reported initially. The latest level was the lowest since 921,000 starts during January 1991. Consensus expectations had been for 874,000 starts.

During September, starts of single-family homes fell by 12.0% to 544,000 units, their lowest level since late-1981. Since their peak in early 2006, single-family starts are down by roughly two-thirds. Permits to build these single family homes also fell 3.8% (-38.9% y/y) to 532,000, their lowest since the recession during 1982.

Starts during 2Q fell by 7.2% from 1Q and that decline was accompanied by a 0.5 percentage point subtraction from real GDP growth. In 3Q, single-family starts fell 10.9% from the 2Q average. These new figures suggest that housing this quarter will even more of drag on GDP. 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 in September recouped just a bit of their earlier declines with a 7.5% increase. Nonetheless, 3Q starts fell 20.7% from 2Q after that period's 7.5%.

By region, August starts of single-family units in the Northeast fell 4.8% (-23.4% y/y) to a new low. In the Midwest starts fell an even harder 24.1% (-43.3% y/y). In the South single family starts fell 6.3% (-42.3% y/y) while in the West starts dropped 17.7% (-45.5% y/y) and erased all of the prior months' gains.

Housing Busts and Household Mobility from the Federal Reserve Bank of New York can be found here.

Housing Starts (000s, SAAR) September August July Y/Y 2007 2006 2005
Total 817 872 949 -31.1% 1,341 1,812 2,073
Single-Family 544 618 644 -41.9 1,034 1,474 1,719
Multi-Family 273 254 305 9.6 307 338 354
Building Permits 786 857 937 -38.4 1,389 1,844 2,160
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