WASHINGTON, DC - Home builders cut groundbreakings a sixth time in a row during December and brought construction to a new low, according to a report that suggested the industry will get worse. Meanwhile, the number of U.S. workers filing new claims for state unemployment benefits soared last week to match the quarter-century high reached in December, suggesting layoffs continued unabated into the new year.
Housing starts decreased 15.5 percent to a seasonally adjusted 550,000 annual rate compared to the prior month, after dropping 15.1 percent in November to 651,000, the Commerce Department said Thursday. Originally, Commerce reported November starts fell 18.9 percent to 625,000. For 2008, starts totaled 904,300 on an unadjusted basis, falling from 1.355 million in 2007. It marked a new low, shatterring the previous record of 1.014 million set in 1991.
The December decrease of 15.5 percent was much bigger than Wall Street expected. Economists surveyed by Dow Jones Newswires forecast a 4.0 percent drop to an annual rate of 600,000.
Tight credit conditions and falling prices are hurting demand for homes, and builders have been cutting back sharply. Year over year, housing starts were 45.0 percent below the level of construction in December 2007.
The National Association of Home Builders released results Wednesday of a monthly survey of builders' thoughts on market prospects. Its latest, January index for sales of new, single-family homes fell to 8 from 9. "The NAHB index indicated that the drop in mortgage rates that began in November has yet to lead to any marked improvement in new-home sales," said Abiel Reinhart, an economist at J.P. Morgan Chase Bank.
Thursday's data on starts showed building permits decreased 10.7 percent to a 549,000 annual rate in December. Economists had expected permits down 0.8 percent to a rate of 610,000. November permits dropped 15.8 percent to 615,000. Permits are a sign of future construction.
December single-family housing starts decreased 13.5 percent to 398,000. Construction of housing with two or more units fell 20.4 percent to 152,000; within that category, groundbreakings of homes with five or more units, or multi-family, were 17.1 percent lower.
Regionally, housing starts fell 2.2 percent in the West, 22.2 percent in the South, and 24.5 percent in the Midwest. Starts rose 12.7 percent in the Northeast.
Nationwide, an estimated 37,100 houses were actually started in December, based on figures not seasonally adjusted. An estimated 40,000 building permits were issued last month, also based on unadjusted figures.
Source: WSJ.com