Home Construction Ends Worst Year Since 1959
New-home construction fell 15.5 percent from November to December, to an annual pace of 550,000, the slowest pace on record, the Commerce Department reported on Thursday. Home builders have all but shut down projects as home values plunge and potential buyers stay on the sidelines of the troubled housing market. What you’re seeing is capitulation…
Update: A reader nicely sent in the above graph from Citigroup. Click to view a larger version.
Housing starts are pretty well correlated with existing home sales…~87.5% using data back to 1999 (as far back as NAR provides data). Correlation improves slightly to 90.6% using a 2 month lead for existing homes sales. I used a 3mo moving average of the SAAR data, then did a y-o-y % change to get the results. Recent data is showing that existing home sales are not going down y-o-y as much as they had been, but new housing starts continue to plummet…today’s numbers were down 45% y-o-y. Using a three month moving average of the SAAR starts, we are now 71% below the most recent peak. This compares to the last three peak to trough average decline of 63%…with no end in sight yet.
I need an explanation of housing starts too. How is this bad news for anybody but greedy builders? I don’t get it. Dwindling supply of those suburban newly built houses is what will help values of the existing houses out there, for those who already own them.
serious question here–how do housing starts correlate with sales of existing houses? Do they track together?