Housing Starts Plummet Amid Low Builder Confidence

Housing starts dropped 16.8 percent from the previous month to a seasonally-adjusted annual rate of 466,000 in January, according to data published Wednesday by the U.S. Commerce Department. Starts are down 56.2 percent for the year since January 2008. Building permits fell 4.8 percent for the month to a seasonally-adjusted 521,000 rate, according to the data. The number of single-family unit starts dropped more than 50 percent in the Northeast since December, to 23,000 in January. Single-family unit starts were down from 59,000 to 47,000 in the Midwest. Singe-family units in the South were also down to 194,000 from 205,000 in the month. The West was the only region that saw a slight bounce in singe-family units; starts increased to 83,000 from 81,000. The continued weak starts in January likely fueled weak builder sentiment in February. Builder sentiment remained at a historic low in the month, according to a survey released Tuesday by the National Association of Home Builders. The index rose a single point to nine on a scale of 100, “virtually unchanged” from the previous month, indicating only a fraction of home builders views the current sales conditions as good. The NAHB expressed some optimism on the heels of the passage of the economic stimulus, citing as examples of potential industry growth: the $8,000 first-time home buyer tax credit, an extension of the 2008 FHA, Fannie Mae (FNM) and Freddie Mac (FRE) loan limits for high-cost areas, and other tax relief provisions regarding energy-efficient and low-income housing projects. “Home builders are especially concerned about the continually rising number of foreclosures and short sales, which are flooding the market with excess inventory and undermining overall home values,” noted chief economist David Crowe. “…We are therefore looking forward to working with the Treasury Department as details of its plan to address the urgent foreclosure problem emerge.” President Barack Obama on Wednesday announced a foreclosure mitigation plan half again as large as the $50 billion one rumored in recent weeks. A combination of TARP money and funds raised from the Treasury’s announcement of increased investment in the GSEs will back the program, which will begin March 4 and which targets up to 9 million borrowers at risk for foreclosure with refinance and modification options. Write to Diana Golobay at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.