New home construction sinks to 25 year low

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for February 2011 showing a 9.3 percent decrease in single-family home building permits from January, and a 27.0 percent decrease in new home starts compared to the year before.

The report shows:

  • Building permits issued for single-family residences in February were at an annual rate of 382,000 which is 9.3 percent below the revised January rate of 421,000 and a decrease of 27.0 percent from a year ago when the rate was 523,000.
  • Housing starts for single-family residences in February were at an annual rate of 375,000 which is a decrease of 11.8 percent from the revised rate for January of 425,000 and an decrease of 28.8 percent from a year ago.
  • Homes completed in February were at a rate of 468,000 homes, an increase of 11.2 percent from January’s revised rate of 421,000 homes and an increase of 2.9 percent from a year ago.

As I say every month, we need to remember that all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for February 2011 versus February 2010. Another way I like to look at where things stand is to simply look at the year to date data; actual numbers, not seasonally adjusted, compared to last years ytd numbers at this same time. I think this may give a little better comparison so those numbers are below:

  • For 2011 there have been 52,600 permits issued for new homes compared with 65,800 this time year for a decrease of 20.1 percent.
  • For 2011 there have been 52,000 new homes started compared with 52,000 this time last year for a decrease of 22.4 percent.
  • For 2011 there have been 60,400 new homes completed compared with 60,700 this time last year for a decrease of 0.5 percent.

Let’s do one of my favorite things and look at the raw numbers and not seasonally-adjusted numbers to compare construction activity to sales:

  • In the 12 month period through January 2011 (the most recent period sales data is available for) there were 298,000 new homes sold and there were 494,700 new homes completed, outpacing sales by 66.0 percent.

I’ve been harping for a long time that I don’t get why it makes any sense in this market for new home construction to out pace new home sales, particularly to the extent we are seeing it. For this reason, I’m not surprised to see new construction numbers where they are...I actually think it will be good for the overall housing market to see new construction back down until housing inventory begins to shrink.

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