FXstreet.com (Barcelona) - The US housing slump does not seem to have a close end, according to the latest housing starts figures, which reached a 16 year low in November, while the building permits, slumped from November, according to data released by the Commerce Department.
Starts of new houses decreased 14.2% in December, to an annual rate of 1,006,000 houses, down from the 1,173,000 revised estimate from November. Year on year, housing starts have slumped 38.2% from the 1,629,000 annual rate posted in December 2006. The estimation for the whole 2007 reaches a total amount of 1,353,700 housing units, 24.8% below the 1,800,900 amount posted in 2006.
The 40.1% drop in multi family units has a great part of the responsibility on DecemberÃ‚Â´s the decrease, according to Ian Shepherdson, Chief U.S. Economist at High Frequency Economics, Ltd: The plunge in starts was driven by a massive 40.1% drop in the hugely volatile multi-family sector; single-family starts dipped only 2.9%.
The outlook for construction activity does not look much brighter, as building permits, a forward looking indicator housing starts, decreased 8.1% to 1,068,000 annual ratite from the revised 1,162,000 annual rate posted in November, and 34,4% below December 2006's reading of 1,628,000. In the whole 2007 building permits were estimated to have totalled 1,376,100 some 25,3% below the 1,838,900 reading estimated in 2006.
From these figures, according to Shepherdson, we can expect some more downside risk for starts over the next two months: As always we are more interested in permits, because they are less affected by the weather. Single-family permits were very weak, down 10.1%, suggesting further downside risk for starts over the next month or two.
Furthermore, Shepherdson underlines the acceleration of the housing slump from last summer's turmoil in the markets: The rate of decline of permits has reaccelerated markedly since the turmoil in the markets began in the summer; builders have finally thrown in the towel. This is a precondition for recovery, as it will eventually reduce the inventory overhang, but there is a long way to go.