Not just once but twice in as many days, news media have used the word “unexpectedly” to describe serious economic bad news in the housing industry. Yesterday, CNBC used it to report on homebuilder sentiment as housing sales fall and foreclosures rise. And unemployment has builders wondering when they can expect to start selling houses again at all:
US home builder sentiment unexpectedly fell in January to the lowest level since June on concerns over the weak labor market and high foreclosure volume, according to a survey on Tuesday that pointed to a patchy recovery in the housing sector.
The National Association of Home Builders/Wells Fargo Housing Market Index for January slipped to 15 from 16 in December, below market expectations for a reading of 17.
The survey blamed the setback in sentiment on the weak labor market, which has produced the highest unemployment rate in 26 years.
A reading below 50 indicates more builders view sales conditions as poor than good.
A reading of 15 apparently means “epic fail,” then. Given today’s report on housing starts in December from the AP, which also uses its favorite word on economic bad news, that hardly should come as a shock. However, the AP report offers an unexpected reason for the decline:
New U.S. housing starts unexpectedly fell in December, likely the result of unusually cold weather, while producer prices rose for a third straight month.
The Commerce Department said on Wednesday housing starts fell 4 percent to a seasonally adjusted annual rate of 557,000 units, pulled down by a drop in groundbreaking activity for single-family dwellings. Analysts polled by Reuters had expected housing starts to rise to 580,000 units. …
Groundbreaking activity dropped a record 38.8 percent to an all-time low of 553,000 units for the whole of 2009.
There is some good news, albeit perhaps in a direction the White House would not have preferred. Multifamily starts rose the last two months, meaning that rental demand has increased — likely a byproduct of foreclosures and unemployment. Permits for buildings rose in December, which hints at better times ahead, but it’s unclear whether those are permits for single-family homes or multi-family dwellings.
The cold weather in December gets the blame for the bad news in the AP report, but CNBC’s report makes it clear that the sentiment in the home-building industry is deeply pessimistic — and that has nothing to do with the weather. Home builders don’t see a market reappearing in the near term, thanks to chronic high unemployment and the next round of foreclosures that merely got postponed by Obama’s stimulus and bailout programs. Until employment improves and people can hold mortgages they can afford, builders are not likely to start another boom or bubble.