Housing Starts Stalling

Don Hogsett, Staff Staff, March 12, 2007

In one more rough-and-tumble month for the nation's big housing market, sales skidded down at a double-digit pace in January for the two most forward looking indicators, housing starts and new home sales, while the giant market for less costly existing home sales edged up modestly for a second straight month.

Providing some relief to an angst-ridden housing sector, sales of existing homes, which account for more than two-thirds of all U.S. housing activity, ticked up for the second month in a row, rising by 3.0% to a seasonally adjusted level of 6.5 million units, the National Association of Realtors reported. But even after two consecutive monthly gains, sales are still off by 8.7% from a level of 7.1 million units recorded for all of 2005 when the housing market was at its zenith.

And David Lereah, chief economist for the home-sellers' trade group, cautioned against reading too much into the January upturn. "Although we're expecting existing home sales to gradually rise this year, and buyers are responding to the price correction, some unusually warm weather helped boost sales in January," he said. "On the flip side, the winter storms that disrupted so much of the country in February could negatively impact the housing market." A large number of transactions was postponed in February, he said, "and home shopping was essentially shut down for about a week in many areas," pointing to a drop in February sales.

The outlook remains weak, with housing starts tumbling by 14.3% as the nation's increasingly fretful home builders put aside their tools as they work through a surplus of unsold homes. Starts improved by 8.9% in Northeastern states, but bled down everywhere else. Sales of pricey new homes, a highly volatile sector subject to wide monthly swings, plunged by 16.6%, the biggest one-month drop in years. Sales were off in every region of the nation, with the Northeast especially hard pressed, dropping by 18.7%. Underlining the perilous state of home builders, and the banks who finance them, sales of new homes have fallen by 20.1% over the past year, to a seasonally adjusted level of 937,000 units, down from 1.2 million units in January of 2006.

Housing By Region
Month-To-Month % Change, January, 2007

Source: U.S. Department of Commerce and National Association of Realtors
Northeast 0.0% 8.9% -18.7%
Midwest 4.8 -15.2 -8.1
South 2.0 -11.8 -9.7
West 5.6 -28.5 -37.4

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