Housing starts in December worst in a year

posted at 1:36 pm on January 19, 2011 by Ed Morrissey

Does anyone still hope that the housing market will lead a new recovery, or rather continue to handicap it?  Bloomberg reports that the numbers for new housing starts in December sank to a new low, which won’t surprise those who keep track of inventory and housing values.  That group apparently doesn’t include market prognosticators:

Builders began work on fewer homes than projected in December, a sign the industry that triggered the recession continued to struggle more than a year into the U.S. economic recovery.

Housing starts fell 4.3 percent to a 529,000 annual rate, the lowest level since October 2009, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg News survey called for a 550,000 rate. A jump in building permits, a proxy for future construction, may reflect attempts to get approval before changes in building codes took effect at the beginning of this year.

Companies like KB Homes and Lennar Corp. project demand will be slow to rebound as elevated unemployment and mounting foreclosures discourage buyers. While low borrowing costs and falling prices are helping revive sales from last year’s post tax-credit slump, Federal Reserve policy makers are concerned housing may undermine the economic expansion.

“With sales still near record lows and a lot of unsold properties in the market, there’s very little reason for builders to add more homes to the supply,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, who had forecast starts would drop to a 527,000 rate. “Housing remains a key downside risk to the economy.”

Of course it does.  High unemployment means fewer qualified buyers, and housing values continue to drop in reaction to the burst bubble in the housing markets.  Those who are underwater on their mortgages can’t afford to move; those who have solid equity and could make a move to take advantage of pricing can’t find buyers.

Even the good news comes with a big, government-imposed caveat.  Earlier today, the government announced a big jump in permit applications, which would normally signal an upcoming expansion in construction.  In this case, though, the move is mainly predicated on expanded government regulation in building codes, which will act to depress permit applications from this point forward.  Permit applications are relatively inexpensive and do not mean that builders will actually develop those properties, and in this case it may mean a dearth of such applications for the foreseeable future — at least until prices rise enough to make adherence to new building codes worth the investment.

In order to get the economy moving and expand hiring, governments really have just three realistic options: tax policy, monetary policy, and regulatory policy.  Once again, this demonstrates that we’re going in the wrong direction on the latter and not doing anything on the first two, and we’ll see the results over the next few months.


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Everyone’s just waiting on Obama’s “laser like focus” on job creation….or something.

search4truth on January 19, 2011 at 1:39 PM

It’s kind of hard to buy a house…

… when you don’t have a job.

Seven Percent Solution on January 19, 2011 at 1:40 PM

Look at housing starts, and look at foreclosures.

Skandia Recluse on January 19, 2011 at 1:42 PM

It may be hard for someone to move to where the jobs are when they are weighed down by houses that they cannot sell.

At the end of the day, it is Bush’s fault. Certainly it has nothing to do with Barry’s incompetence in handling the economy.

bayview on January 19, 2011 at 1:43 PM

Could it be that the gw crud kept all states but FL under snow and cold?
L

letget on January 19, 2011 at 1:49 PM

DOTUS Check list:

Shrink Housing Industry, drive builders out of business, put more people out of work and depending on the Federal Government.

CHECK.

PappyD61 on January 19, 2011 at 1:49 PM

Recovery winter!!11!!

the_nile on January 19, 2011 at 1:55 PM

Housing starts in December worst in a year

Alternative headline…

“Obowma’s “Green Housing” plan a success…

… More people living in caves than ever!”

Seven Percent Solution on January 19, 2011 at 1:57 PM

Sales of existing houses are down. A house across the street from me has been on the market for 2 years, listed at $10K less than what I paid for mine (same square footage, and year built.)

rbj on January 19, 2011 at 1:58 PM

If you like your home, you can keep lose your home.

-Barrack Obama

portlandon on January 19, 2011 at 2:09 PM

Just the continuation of “Recovery Summer”….

The idea that the Obama administration has made any serious progress in strengthening this economy is about as ludicrous as thinking democrats know anything about “civil debate”…

….like this:

House Democrat Compares GOP To Nazis In Health Repeal Debate

http://www.realclearpolitics.com/video/2011/01/19/house_democrat_compares_gop_to_nazis_in_health_repeal_debate.html

…here we have a democrat comparing Republicans to Nazi’s and throwing around the word “blood libel”…..

…waiting for other democrats and their friends in the MSM to call out this liberal for his “vitriolic hate speech”….

Baxter Greene on January 19, 2011 at 2:12 PM

DUH.

Just duh. I’ve got construction workers calling me weekly looking for work. There is no relief in sight for this industry but that’s only the tip of the iceberg. There is no relief for the general public in this sector of the economy.
Talk about the elephant in the room. Although at the moment there are quite a few elephants in the room. So why should this one get any attention?

ORconservative on January 19, 2011 at 2:12 PM

At the end of the day, it is Bush’s fault. Certainly it has nothing to do with Barry’s incompetence in handling the economy.

bayview on January 19, 2011 at 1:43 PM

If you want to lay blame on someone, it’s Greenspan. He orchestrated the bubble by allowing interest rates to stay as low as they did for as long as they did. Bush and Obama added to the stupidity. But without 1% interest rates courtesy of Greenspan, there is no bubble and no bust.

angryed on January 19, 2011 at 2:14 PM

If you like your home, you can keep lose your home.

-Barrack Obama

portlandon on January 19, 2011 at 2:09 PM

Oh please. Nobody who forecloses loses their home. If it was their home, they wouldn’t have a mortgage on it. What they are losing is the right to live in a house owned by a bank due to non-payment.

I’m so sick of the victim-hood bestowed upon deadbeats who don’t pay their mortgage.

angryed on January 19, 2011 at 2:16 PM

I’m selling right now (or attempting to sell). The extra inventory due to short-sales and foreclosures is killing the market. I’ve been on market since September with no end in sight. And my reward for my patience will be a 40k haircut from when I bought 5 years ago. I love Obanomics.

SittingDeadRed on January 19, 2011 at 2:20 PM

Once again, this demonstrates that we’re going in the wrong direction on the latter and not doing anything on the first two, and we’ll see the results over the next few months.

Things look grim for housing but I know institutional investors are starting buy including the same investment teams which first suggested there was a housing bubble. This has started, as it nearly always does, in high priced markets but it is a sign that things are turning. They expect the wider market to pick up after stabilizing early this year.

lexhamfox on January 19, 2011 at 2:20 PM

There is a house started right next to us. It is going to block our view of the park… darn economic pick up!

Looks like they are pouring footings today.

petunia on January 19, 2011 at 2:21 PM

Things look grim for housing but I know institutional investors are starting buy including the same investment teams which first suggested there was a housing bubble. This has started, as it nearly always does, in high priced markets but it is a sign that things are turning. They expect the wider market to pick up after stabilizing early this year.

lexhamfox on January 19, 2011 at 2:20 PM

Your post could have been written in 2006, 2007, 2008, 2009 or 2010. Every few months there is a report of these mythical institutional investors buying up r/e which means the depression is over.

Housing isn’t coming back until prices get in line with incomes. As it stands now, prices are still way too high. And all the institutional investors in the world won’t change that fact.

angryed on January 19, 2011 at 2:24 PM

Your post could have been written in 2006, 2007, 2008, 2009 or 2010. Every few months there is a report of these mythical institutional investors buying up r/e which means the depression is over.

Housing isn’t coming back until prices get in line with incomes. As it stands now, prices are still way too high. And all the institutional investors in the world won’t change that fact.

angryed on January 19, 2011 at 2:24 PM

I think there’s a few local markets that will stabilize , when people flee from high tax states.
But all in all the market is sinking.

the_nile on January 19, 2011 at 2:31 PM

angryed on January 19, 2011 at 2:16 PM

I have to disagree. This is more complicated than deadbeats who do not pay their mortgage. There are those but that is not the whole story in the housing mess. The big mortgage lenders would love it if you kept that belief. So, be my guest.

ORconservative on January 19, 2011 at 2:32 PM

I have to disagree. This is more complicated than deadbeats who do not pay their mortgage. There are those but that is not the whole story in the housing mess. The big mortgage lenders would love it if you kept that belief. So, be my guest.

ORconservative on January 19, 2011 at 2:32 PM

The market crashed because people couldn’t afford to pay the loans even when they had jobs. It was all depending on increasing debt. Now even less people have jobs and lower paying jobs. Take a look at japan and it house boom and bust cycle.

http://www.marketoracle.co.uk/images/2008/japan-house-prices–nov08.gif

the_nile on January 19, 2011 at 2:41 PM

I have to disagree. This is more complicated than deadbeats who do not pay their mortgage. There are those but that is not the whole story in the housing mess. The big mortgage lenders would love it if you kept that belief. So, be my guest.

ORconservative on January 19, 2011 at 2:32 PM

That is the whole story. People bought too much house. They cannot afford the payments. They foreclose. There is no more to the story.

Now if you want to start playing the Democrat game of blaming EEEEEEEVIL Wall St, be my guest. But I don’t know of a single instance of a foreclosure where the borrower was forced against his will to sign up for the mortgage by a Wall St banker. If you have such evidence, by all means share it with me.

angryed on January 19, 2011 at 2:44 PM

Now if you want to start playing the Democrat game of blaming EEEEEEEVIL Wall St, be my guest. But I don’t know of a single instance of a foreclosure where the borrower was forced against his will to sign up for the mortgage by a Wall St banker. If you have such evidence, by all means share it with me.

angryed on January 19, 2011 at 2:44 PM

It’s the crony cooperation between government and big banks that really is evil. If people default , they should lose ownership , house owner or bank owners the same.

But the banks that failed gets protection, they should have been put in chapter 11 at least and the scammers should be put on trial. Crony capitalism is neither fair or efficient.

the_nile on January 19, 2011 at 2:52 PM

Hey, maybe requiring $10,000 sprinkler systems in all new homes will help!

Now that Republicans control both houses and the governorship in PA, they will have the cojones to repeal this nonsense.

forest on January 19, 2011 at 2:59 PM

But the banks that failed gets protection, they should have been put in chapter 11 at least and the scammers should be put on trial. Crony capitalism is neither fair or efficient.

the_nile on January 19, 2011 at 2:52 PM

I agree. But hat is a separate discussion than the the cause of foreclosures.

angryed on January 19, 2011 at 3:13 PM

Hey! How about everyone in a home, 20 years or older, BURNS IT DOWN. Then the government will give you a $50,000 CASH subsidy to buy a new house?

Call it “Cash for Condo’s!”

It worked so well for the auto industry.

GarandFan on January 19, 2011 at 3:33 PM

Got this years property assessment. My house is worth $48000 less than last years assessment. So if you have the money its a buyers market.

Greed on January 19, 2011 at 10:39 PM

Hey, maybe requiring $10,000 sprinkler systems in all new homes will help!

Come on what are they made of gold? installing a 100 ft of pipe or so and some sprinkler heads while doing the rest of the plumbing in non finished walls and floors. 10 grand? Should a been a plumber

Greed on January 19, 2011 at 10:49 PM