The last couple of months I have said that, “unless something changes dramatically, 2011 will hit a new record low of new home starts. Unfortunately, nothing dramatic happened, and 2011 has ended with only 428,600 new home starts setting a new record low and significantly below the prior all-time low of 445,200 starts in 2009.
The good news is, the pace is picking up…
The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued their report on New Residential Construction for December 2011 showing an increase in single-family home building permits from the month before of 1.8 percent and a 4.4 percent increase in new home starts compared to the month before.
Highlights from the December 2011 Report:
- Building permits issued for single-family residences were at an annual rate of 44,000 homes which is 1.8 percent above the prior month and a decrease of 0.2 percent from a year before.
- Housing starts for single-family residences were at an annual rate of 470,000 which is an increase of 4.4 percent from the prior month and an increase of 11.6 percent from a year before.
- Homes completed were at an annual rate of 448,000 homes, which is a decrease of 0.9 percent from the prior month and a decrease of 1.3 percent from a year before.
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 the current month versus the a year before. 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 were 413,700 permits issued for new homes compared with 447,300 the prior year for a decrease of 7.5 percent.
- For 2011 there were 428,600 new homes started compared with 471,200 the prior year for a decrease of 9.0 percent.
- For 2011 there were 444,900 new homes completed compared with 496,300 the prior year for a decrease of 10.4 percent.
Clearly, for as long as foreclosures continue to put downward pressure on home prices and result in existing homes selling for much less than the cost of new construction, we are not going to see a recovery in the new home market. At the rate we are going, while I expect to see an increase in new home construction and sales in 2012, I think it will probably be as much as 5 years or more before we see signs of a sustainable recovery in the new home market. The silver lining is, as the inventory of new homes continues to decline and not be replaced, once demand picks up there is a likelihood in many markets that demand will exceed supply for a while making for somewhat of a robust market.
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