Housing starts fall sharply

Housing starts fall sharply, inflation edges up

Wed Nov 18, 2009 4:29pm EST

By Lucia Mutikani
WASHINGTON (Reuters) - Construction of new homes in the United States hit a six month low in October, providing more evidence of the economy's sluggish recovery, while a surge in the cost of new and used vehicles lifted consumer prices.


The data came a day after a report showed U.S. industrial output barely budged last month, suggesting the recovery stalled somewhat after a growth spurt in the third quarter.

Analysts said slow healing in the housing market, relatively benign inflation and excess slack in the economy meant the Federal Reserve would be able to honor its commitment to keep interest rates near zero for an extended period.

"It's going to be a slow, uneven recovery. There has been a bit of a pause in the last month or so. We have a low growth situation here, but I wouldn't say it's big enough to return to recession," said Nick Kalivas, vice president of financial research at MF Global in Chicago.

The Commerce Department said housing starts dropped 10.6 percent to an annual rate of 529,000 units, the lowest since April. It was the biggest decline in 10 months.

Financial markets had expected starts to rise to a 600,000 units pace. U.S. stocks fell on the surprise drop, ending three days of gains that had hoisted the major indexes to 13-month highs. Stocks ended just off their 2009 highs.

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Hmmmmm....

It is beginning to get cold out isn't it?:mrgreen:

Goldenboy219 said:

Hmmmmm....

It is beginning to get cold out isn't it?:mrgreen:

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You would think economists would take that into account and not predict a rise in housing starts when the weather gets cold.

Strucky said:

You would think economists would take that into account and not predict a rise in housing starts when the weather gets cold.

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Of course, but that does not necessarily give an accurate measure of the picture. It makes sense, at least to me, that the total amount of housing starts will decline during the winter months.

Strucky said:

The Commerce Department said housing starts dropped 10.6 percent to an annual rate of 529,000 units, the lowest since April. It was the biggest decline in 10 months.

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Look at the foreclosure rates. There's a reason that new housing starts are at an all time low. It makes no sense to start building new houses when demand cannot keep up with inventory.

Strucky said:

You would think economists would take that into account and not predict a rise in housing starts when the weather gets cold.

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Well of course they do. Almost all economic time series are reported on both a seasonally adjusted as well as non-seasonally adjusted basis.

Another good example of expectations diverging from actual was in the most recent initial unemployment claims. This reporting week typically sees an uptick in initial claims. But in the most recent reported week, actual claims were up much less than expected, resulting in a decline in initial claims on a seasonally-adjusted basis.

Beginning about this time of the year, the seasonal adjustment factors become quite volatile for several time series, accounting for quite a number of surprises relative to expectations. This typically lasts until the 1st or 2nd reporting period of the new year, after which they begin to stabilize once again.

obvious Child said:

Look at the foreclosure rates. There's a reason that new housing starts are at an all time low. It makes no sense to start building new houses when demand cannot keep up with inventory.

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Quite true, but doesn't quite address the point that GB was trying to make.

WRT your point: I have been monitoring housing in our region quite closely for quite a while now (over 3 years). To elaborate on your point a bit, I have observed that quite a number of bank-owned foreclosed properties are currently being held off the market by their bank owners. This has been particularly true for mid- and higher-priced houses; less so for houses in the lower price ranges.

This has the effect of lowering the reported inventory of houses for sale. If the experience in our region is consistent with that in other regions, then the inventory of houses hanging over the market is considerably larger than that being reported based on the regional MLS systems.

Construction will be the last part of the economy to recover. The sooner the economists figure this out, the better everyone will be so that they don't freak out when their asinine predictions go wrong.

It was one of the first industries to tank, and it'll be the last to get better.

So many empty homes, so many for sale, this could take ten years to recover from, get your house in order people!

Jackboot said:

So many empty homes, so many for sale, this could take ten years to recover from, get your house in order people!

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Yep. There is an over abundence of houses and no need to keep building them if they aren't needed.

We need to stimulate renewable industries such as alternate energy, not build houses that no one needs. We, first and foremost need to be energy independent so we no longer need to kiss the butts of Mid East oil sheiks. We need to get our priorities straight for the long haul instead of doing the same old thing wrong over and over again.

Jackboot said:

So many empty homes, so many for sale, this could take ten years to recover from, get your house in order people!

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I heard this idea tossed around, that if you allowed free immigration (only exclude criminals and those with bad diseases) then all of those housing units would be filled and prices might actually rise again. But hey, those damned illegals took our jobs! :roll: