Single-Family Home Starts in U.S. Fall to 26-Year Low
By Bob Willis
Housing starts in the U.S. fell more than forecast in September as construction of single-family homes plunged to the lowest level in 26 years, indicating the three-year real-estate slump is intensifying.
Construction of single-family homes dropped 12 percent to a 544,000 annual rate, the Commerce Department said in Washington. Starts on all residential properties, including condominiums, slid to 817,000, below all 74 forecasts in a Bloomberg News survey.
Builders will find it difficult to lure buyers into the market after stock prices plunged this month and banks made it harder to qualify for a mortgage. Declines in construction are likely to continue to hurt economic growth well into 2009, extending the housing slump into a fourth year.
‘‘The full impact from the financial meltdown is yet to come,'' said David Sloan, a senior economist at 4Cast Inc. in New York, whose estimate matched the lowest in the Bloomberg survey. ‘‘Housing will be a drag on growth into the middle of next year. The bottom is now looking further away than it did previously.''
Treasuries climbed, sending benchmark 10-year note yields down to 3.88 percent at 9:31 a.m. in New York, from 3.96 percent late yesterday. The Standard & Poor's 500 Stock Index fell 1.8 percent to 929.86.
Building permits, a sign of future construction, dropped 8.3 percent to a 786,000 pace, matching the lowest level since November 1981.
Total starts were projected to fall to an 872,000 annual pace, according to the median forecast of the economists polled by Bloomberg News. The reading for August was revised down to 872,000 from a previous estimate of 895,000.
Compared with September 2007, work began on 31 percent fewer properties. Work on multifamily homes, such as townhouses and apartment buildings, climbed 7.5 percent from the prior month to an annual rate of 273,000.
Starts of single-family houses dropped to record lows in three of four regions in September, led by a 24 percent slump in the Midwest.
The biggest housing slump in a generation was showing signs of nearing a bottom when financial markets began to implode in September, leading to the government takeover of mortgage lenders Freddie Mac and Fannie Mae, the failure of banks and a $700 billion government rescue plan this month. Recent events are likely delaying any return to stability.
‘‘These things are putting a new nail'' in the housing market's coffin, David Seiders, chief economist at the National Association of Homebuilders, said in an interview on Bloomberg Television yesterday. ‘‘this sort of vicious feedback loop is still in play.''
The National Association of Home Builders/Wells Fargo index of builder confidence decreased in October to its lowest since 1985, the Washington-based association said yesterday.
Combined sales of new and existing homes have fallen 36 percent from their peaks in mid-2005. Home construction has declined 64 percent from a peak in January 2006. The supply of unsold homes on the market remains above 10 months' worth of sales, signaling homebuilding is likely to continue falling.
Home prices in major cities are down an average of 20 percent from mid-2006, after nearly doubling in the prior six years, according to the S&P/Case Shiller index of 20 metropolitan areas.
Falling prices are contributing to the jump in foreclosures as Americans, trying to refinance adjustable-rate loans, find out they owe more than their homes are worth. The drop in prices also means owners can't tap home equity for extra cash, one reason behind the slowdown in consumer spending.
Homebuilders are still reeling. Lennar Corp., the second- largest U.S. homebuilder, on Sept. 23 reported its sixth straight quarterly loss as potential buyers struggled to get mortgages and rising foreclosures increased the supply of homes on the market.
‘‘The weakness in the market actually accelerated as a result of increased foreclosures, weakened consumer confidence and tightened mortgage lending standards,'' Chief Executive Officer Stuart Miller said in a statement.