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Thursday, September 18, 2008

U. S. Housing Starts

The U. S. Department of Housing and Urban Development released the new residential construction statistics for August 2008 on September 17. 2008. Total starts declined to
a seasonally adjusted annual rate of 895,000; which is 6.2 percent below the July estimate of 954,000 and is 33.1 percent below the revised August 2007 rate of 1,337,000. Single family starts declined to 630,000. This represents a 1.9 percent decrease from the July figure of 642,000; and a 34.9% decrease from August 2007.


Historically, starts have decreased to a seasonally adjusted range between 904,000 and 791,000 before rebounds have occured. The starts figure from August puts us within that channel. While most consider a decline in starts and permits to be a negative leading indicator, a slightly longer term perspective might tell us that construction in the housing market is approaching a point that is unsustainable, given normal increases in population and attrition of housing units overall. In other words, there are not enough houses being built to satisfy long term demand.

Both total starts and single family starts (SF) have decreased to the range that has been unsustainable in the past. This could mean that the housing market is close to recovering. A housing recovery should help improve the entire U. S. economy.

A large amount of capacity for single family residential construction has been removed. This includes lumber and panel mills which have been temporarily or permantly closed, building material product suppliers that have reduced locations and personnel, and builders that have downsized or ceased to exist. A small increase in demand for new homes could overwhelm the existing supply chain.

-Reid Adams
Cofer/Adams Building Center, Inc.