Both Housing Starts and Building declined dramatically in October stated a new report released by the Commerce Deparment early this morning.
New Residential Construction In October 2005
Within a matter of minutes the news spread across the news wires.
U.S. housing starts fell 5.6 percent in October as construction of both single-family and multifamily homes slid, while a drop in permits for future groundbreaking was the largest in more than six years, the government said on Thursday.
October housing starts declined to a 2.014 million unit annual rate, slower than the 2.070 million unit pace expected by Wall Street economists, who had anticipated rising mortgage rates would cool activity. The decrease in October starts, from an upwardly revised 2.134 million unit rate in September, was the largest percentage drop since March.
…
Permits for future groundbreaking, an indicator of builder confidence, declined to a 2.071 million unit pace. That was down 6.7 percent from September, the biggest percentage decline since September 1999, when permits fell 7.2 percent, the Commerce Department said.
It said recent Gulf Coast hurricanes had minimal impact on the data.
The Census Bureau report showed that housing starts in October came in at an annual pace of 2.01 million, down from the revised 2.13 million pace in September. Economists surveyed by Briefing.com had forecast that starts would slip to an annual rate of 2.06 million.
Building permits, which are seen as a measure of builders’ view of market strength, dropped to an annual rate of 2.07 million from 2.22 million in September. Economists had forecast permits would fall to a 2.17 million annual pace.
I’m sure the NAR will call this “a normal seasonal slowdown”.
Caveat Emptor,
Grim
Is there a 12 step program for sellers who are in denial?
Industrial Output rebounded back this month..
Factory Production Rebounds Strongly
And Jobless claims fall:
Jobless claims fall to lowest since April
Proof that Fed rate hikes are not impacting the economy negatively. Growth and employment are still strong. The Fed will continue to tighten.
grim
Historically, housing starts are still almost higher than ever though.
Think of starts as only a slight lagging indicator (half a month behind).
Starts were down 5.6% in a single month, that’s a significant drop. Even more so, that’s a signficant single month drop. Compound that out for a few months, housing starts will no longer be at historical highs if the trend continues.
But will the trend continue?
Well, that’s where permits come in. Permits are more of a leading indicator. You can use this months permits to judge starts over the next few months. Permits were down 6.7%, the largest decline in 6 years. A heck of an indicator.
So where does that put starts in the next few months? Even lower yet. If starts came in low, but permits average, there wouldn’t be an issue, just minor weakness this month. But starts lower than estimates, and permits even lower yet? We’re trending downwards and the indicators point to that trend continuing.
Grim
what is going to happen to the housing market? i am interested in buying a home in bergen county… now the housing is slowing and i want to wait, but how long should i wait?
Anonymous said…
what is going to happen to the housing market? i am interested in buying a home in bergen county… now the housing is slowing and i want to wait, but how long should i wait?
I would say when you can afford the house you want…..hahahhahahha
It will diffcult to predict how far and long the market will go down………..I would buy when the income and house prices are more reasonable……
I can’t tell you when to buy or not to buy, I can only give you the information you need to make your own decision.
There are many factors involved in this, it’s not always a simple yes or no.
All I can suggest is that you purchase when you feel the price is fair and justifiable. That decision should not be clouded by dreams of double digit appreciation or decades of low interest rates.
grim
Hmmm let’s see what excuse NAR will come up with
wow a lot of news hitting the wire today about a real apparent slow down. it is going to be hard to spin all of these numbers.
The Crash is on.
Believe it or NOT realtors and sellers.
The word is out. Try spinning it. It ain’t going to work.
a 10% reduction is no reduction at all when prices have escalated 100% in last 3-5 years.
When they drop 35% then we can say some rationaility has come back but not before.
Why do I say this. Cuz with a 35% drop from these insane prices home owners still made about 7% compounded return over last 5 years. Very generous return indeed for housing. So no sympathy here. The fools that bought. BLAME THE REALTORS BUILDERS MTG BROKERS AND YOURSELF.
hOUSING STARTS HIGH?
So what?
What happens at tops?
Dumb money buys and buys and buys and then over builds and result mucho over capacity.
It happens all the time in irrational markets. This housing bubble no different!
Let them keep kepp building so houses plunge even more so.
Thank you for everyone for “when to buy” advice. I was told the market is should be when P/E ratio is about 10%. i.e. if you buy a house for 250K, you should be able to rent it for 2K/month. Is it a fair estimate? It seems like very far off from where it is now…
Grim — in a few towns I’m following in Somerset/Union county, there was a slight pickup in houses going to contract last week. Is that just a sellers and buyers trying to close before the vacation slowdown ? Thats my guess.
Why blame the realtors? I have met more greedy sellers than greedy buyers.