Tuesday, May 16, 2006

U.S. Housing Starts Fell 7.4% in April to 1.849 Million Rate

The US Commerce Department reported (pdf) the new residential construction data:

Builders in the U.S. broke ground on the fewest homes since November 2004 as higher borrowing costs eroded demand, a government report showed.

Housing starts fell 7.4 percent in April, the third straight drop, to an annual rate of 1.849 million from 1.996 million. Building permits, a sign of future construction, fell 5.4 percent to an annual rate of 1.984 million, the Commerce Department said today in Washington. (Bloomberg 5/16/06)

These numbers are subject to large degrees of uncertainty. The initial residential numbers are certainly a disappointing measure for the homebuilders.


  1. The same report stated that inflationary indicators came in lower than expected: .1 instead of .2 %

    The stock market looks like it is getting beaten down over the past 3-4 biz days. I think a foundation is being established in the stock markets; for every seller, there is a buyer, and buyers (of stocks) in the know are getting good prices on terrific companies like... certain health care providers.

    If stocks, consumer spending, inflation, oil, etc. all stabilize in the near term, it means growth in the economy, and that means a firmer basis on which to establish RE prices higher than they were several quarters ago.

    *just my opinion*. Don't get mad.


  2. bryce,

    The boom lasted 5 years. The market had been in a downturn for less then a year.

    The declining RE market will last many more quarters.

  3. If the massive price increases of the past 5 years were justifiable by market fundamentals such as rising wages, job growth, and rents rising accordingly, affordability would not really be an problem. You'd have to pay similiar amounts to rent a place to live as you would to buy it, so there would be no cost advantage to renting. But there is a MAJOR cost benefit to rent in my market, even after tax benefits, so it is a problem, even with interest rates still low by historical standards. Even if the Fed stops raising rates in June,the only way to stimulate sales of homes again to get rid of the massive quantities of inventories is to lower the price and increase affordability. Or I guess employers could just double everyone's salary to catch up with home prices and then we'll be back to even.

  4. LOL! I love how I suddenly become a "republican" whenever someone doesn't agree with what I say. I could have walked down the street to see Reagan lying in the Capitol Rotunda, but I never could stand the man, so there was no way I was going to stand in a long line in high heat to see the casket of a dead guy whom I never could stand.

    Honestly, if you disagree with someone and you have the immediate, knee-jerk reaction of using profanity or lumping that person in with a political party (I'm a registered Independent) even though the discussion isn't political; you've got some emotional progress to make in your personal life. Not meant to be an insult, just an informed opinion.


  5. anybody who blames reagan for the problems just doesnt understand economics.
    Let me guess, Clinton is the reason why we had economic strong econmic growth during the nineties. Anyone in government knows things just dont change that fast. Please stop crying damn republicans everytime there is a problem.
    Republicans are for middle class.
    Dems are for the extremely poor and extremely rich. Big government helps the poor and the rich.
    I often find that most people who think they are democrat actually have republican views. Politics is more than abortion and reglion. Believe it or not there are repubs who believe in abortion and are agnostic. Crazy, but true! They just believe in small government which is the core of being republican. So enough politics, lets get back to when is the housing bubble going to finally explode. There are so many economic pressures and the people who are to poor to buy furniture for their Mcmansions keep hanging on!
    anon engineer

  6. Starts are off, but deliveries are up. This bit of data tells me that builders are putting all available resources into on getting everything possible on the market NOW, rather than worrying about starts, i.e., future delivery.

    If you thought the prices were trending upward in the future, would you shift effort to accelerate delivery at the expense of future production? What if you thought prices were going down?

  7. inlibras--

    That is a very apt description of rent! And I agree about the potential for downward prices on rent, which would really be a double whammy. You can't sell it, and you can't rent it for enough to cover your carrying costs, as many rentals/sales around here likely are after taking a look at the tax records and prices paid...well, housing speculation is, after all, just another investment, and just because it's real estate doesn't make it bulletproof against a loss, contrary to seemingly popular beliefs.

  8. After the DC market sinks, dot.condo bagholders will all be in-Depends-dents.