• U.S. housing starts plunged to a new record low in January.
  • Starts for both single-family and multi-family units declined.
  • Permit approvals were also weak.

The decline in U.S. residential construction accelerated further in January, with housing starts plunging a whopping 16.8% M/M to 466K, from 560K (down 14.5% in its own right) the month before. This was far worse than the market consensus for a drop to 529K. The decline was the third month in which construction has declined at a double-digit pace and brings the level of residential construction to a new record low. Building activity is now 80% below the 2273K pace set during the peak of the market in the early part of 2006. The weakness in starts was broadly based, with both single-family construction (down 12.2% M/M to 347K) and multi-family units (down 27.9% M/M to 119K) both falling dramatically. On a year-ago basis, starts are down a staggering 56.2% Y/Y.

Permit approvals were also fairly weak, falling 4.8% M/M on the month, with the level of residential units approved falling to 561K, which is also considerably less than the 2263K permits approved during the heyday of the U.S. housing market. The weakness in approvals was entirely in single-family units, which dropped 8.0% M/M to 335K, while multi-units approval rose 1.6% M/M to 119K - which is the first increase in this indicator since the middle of last year.

On the whole, this report provides another clear indication that the correction in the U.S. housing market still has some more time to run. Indeed, with the U.S. economic recession expected to last well into the latter half of this year, the inventory of unsold homes remaining at historically high levels, and labour market conditions continuing to worsen, we expected builders to continue moderating activity in the facing of slumping housing demand. This decline in activity, while unhelpful to current economic activity, could actually be a welcome development as it will invariably bring the timing of the U.S. housing market recovery closer by whittling down inventory levels.

TD Bank Financial Group

The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.