October New Residential Construction Commentary

The above graph is a visual representation of the Seasonally Adjusted New Residential Construction & Sales data through October 2008. The lines represent Total Permits and Starts, Single Family Permits and Starts, Single Family Units Sold, Total Under Construction and Single Family Under Construction. It is worth noting that there have been several construction downturns since 1959, and that we are at levels that have triggered recovery in all of the past housing downturns.

Looking at Starts only, we see that Total Starts are the lowest they have been before beginning recovery, and Single Family starts are within a few thousand units of the lowest they have been before beginning to recover. Based on the permits we have see in the Atlanta area, November may give us new lows for all aspects of residential construction. Lumber and Panel prices are at or below sustainable levels, with many lumber items at multi-decade lows.

There are several unknowns at this point. Although the quantity of Single Family Homes for Sale is the lowest it has been since May, 2004, there is a 9.1 month supply available. Our economy is probably in a recession, and people don't tend to think about buying a home during a recession.

Capacity for single family residential construction continues to fall as builders, building material product suppliers, and lumber and panel mills continue to downsize or shutdown completely.