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U.S. housing starts continued to stagger in June

07/21/2010 by Alex Carrick

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U.S. housing starts continued to stagger in June, according to the latest joint report from the Census Bureau and the Department of Housing. They fell 5% month to month to stand at only 549,000 units, their lowest level this year. At their trough-point in the recession, they were 477,000 units annualized in April 2009.

For the January to June period this year, they are +14.3% versus the same first six months of last year. The end of the first-time homebuyer tax credit on April 30, 2010 has caused builders to dramatically scale back their development plans.

The negatives for homebuilding remain alarming. Mortgage foreclosures continue to throw properties on the market, amplifying the inventory of unsold units and keeping prices in check.

The overall economy has been slow in restoring jobs, which restrains incomes and holds back family formations. Sons and daughters will continue to seek shelter with parents and grandparents until they become employed and can afford to branch out on their own.

The trend whereby temporary and illegal workers returned home in the recession has also siphoned off some demand for housing from the marketplace.

U.S. new home starts have been weak and little changed since the beginning of last year. There is one good thing that can be said about them: throughout 2009, they were dramatically declining on a year-over-year basis. That took a bite out of the national gross domestic product (GDP) figure.

By remaining flat this year, they are not adding to GDP, but at least they are not dragging it down.

Regionally, first-half starts this year versus last year have made the largest percentage gain in the Northeast (+20.0%). The Midwest (+16.4%) and South (+16.3%) have performed about the same. The West (+5.2%) is trailing the pack.

Nationwide, the single-family market (+29.5%) has picked up the pace, but multi-family projects (-27.9%) languish badly.

As for the outlook, ongoing monetary stimulus is being provided by the Federal Reserve. The federal funds rate will stay between 0.00% and 0.25% through at least the end of this year.

However, tighter oversight and more stringent lending rules at financial institutions are still limiting access to credit in many instances.

One set of numbers does stand out in the latest report. Housing completions in June were 26.2% higher than in May. This suggests a further addition to the inventory of unsold units in the marketplace, again keeping a lid on prices.

At this stage of the business cycle, the weakness in home prices is negatively impacting many people’s confidence levels. Homeowners base much of the assessment of their own financial worth on the value of the property they live in.

U.S. monthly housing starts
(seasonally adjusted at annual rates)
Jan-Jun average 2009 = 0.533 million units;
Jan-Jun average 2010 = 0.610 million units (14.3%).
U.S. Annual Starts:
2005 = 2.068 million units (+5.7%);
2006 = 1.801 million units (-12.9%);
2007 = 1.355 million units (-24.8%);
2008 = 0.906 million units (-33.1%);
2009 = 0.555 million units (-38.8%).
Data source: U.S. Census Bureau (Department of Commerce).
Chart: Reed Construction Data - CanaData.
U.S. and Canada: Monthly housing starts
(seasonally adjusted at annual rates)
Data source: U.S. Census Bureau (Department of Commerce) and Canada Mortgage and Housing Corp. (CMHC).
Chart: Reed Construction Data - CanaData.
U.S. Northeast housing starts   U.S. Midwest housing starts
 
U.S. Northeast annual starts:
2008 = 121,000 units;
2009 = 61,800 units (-48.9%).
 
U.S. Midwest annual starts:
2008 = 134,900 units;
2009 = 97,100 units (-28.0%).
Jan-Jun average 2009 = 59,200 units;
Jan-Jun average 2010 = 71,000 units (+20.0%).
 
Jan-Jun average 2009 = 86,200 units;
Jan-Jun average 2010 = 100,300 units (+16.4%).
     
U.S. South housing starts   U.S. West housing starts
 
U.S. South annual starts:
2008 = 453,400 units;
2009 = 278,200 units (-38.6%).
 
U.S. West annual starts:
2008 = 196,200 units;
2009 = 116,800 units (-40.5%).
Jan-Jun average 2009 = 270,200 units;
Jan-Jun average 2010 = 314,300 units (+16.3%).
  Jan-Jun average 2009 = 117,700 units;
Jan-Jun average 2010 = 123,800 units (+5.2%).

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