New Home-Building Activity Falls to Lowest Level in 6 Years: Another Point for Nouriel Roubini and the Pessimists

Gulp:

New Home-Building Activity Falls to Lowest Level in 6 Years - WSJ.com: By JEFF BATER. November 17, 2006 11:52 a.m.: WASHINGTON -- New home-building activity in the U.S. resumed its decline in October, tumbling to its lowest level in six years as builders dealt with bloated inventories of unsold property. Housing starts decreased by 14.6% to a seasonally adjusted 1.486 million annual rate, the Commerce Department said Friday. Building permits, an indicator of future building activity, fell a ninth consecutive time....

The government also lowered its original estimate for September starts, a number some economists considered a fluke. Construction rose 4.9% to 1.740 million in September, revised from an originally reported 5.9% climb to 1.772 million. Starts fell 5.7% in August, 4% during July, and 6.1% in June. Construction rose 6.6% in May. Economists had expected a less-severe drop in October. The median estimate of 22 economists surveyed by Dow Jones Newswires was a 5.6% fall to a 1.672 million annual rate. The 14.6% decline was the largest since 16.1% in March 2005, and it carried starts to their lowest since 1.463 million in July 2000....

In a sign that starts will likely continue to fall, October building permits dropped 6.3% to an annual rate of 1.535 million; the last month permits rose was January. Economists expected permits would be up by 0.1% to 1.640 million. Permits decreased a revised 5.2% last month to 1.638 million, compared with an earlier estimated 6.3% drop to 1.619 million....

The housing weakness trimmed a full percentage point off economic growth in the July-September quarter, when the economy expanded at a tepid 1.6% rate...

Write to Jeff Bater at mailtoLjeff.bater@dowjones.com

Comments

[wcw]

Now, I am very pessimistic myself about housing, but that's because of vacancies as much as anything else. Cf http://www.bignose.org/blog/index.php?/archives/120-Q3-for-sale-only-vacancies.html

The idea that starts would stand up in the face of that sort of disconnect always puzzled me.

Homebuilder stocks, of course, are up in the last week. Cf http://finance.yahoo.com/q/bc?t=5d&s=%5ERUF&l=on&z=m&q=l&c=&c=%5EGSPC

Like NR, I am cautious. Unlike NR, I just can't bet against the US economy until I see more data. Here cf http://www.bignose.org/blog/index.php?/archives/144-Investor-valuation-confidence.html and one of these days, turn on URLs on your comments.

FD: short homebuilders, net long US equity

[Bupa]

Wish I had invested in St. Joseph statues when I first read Nouriel’s forecasts in July.

If the recession hits in early 2007 as Nouriel confidently forecasts, I can't help but wonder (given the strangeness of the world we live in) if somehow the Democrats will get the blame.

[anne]

http://norris.blogs.nytimes.com/?p=88

November 17, 2006

Housing Starts and the Economy
By Floyd Norris

Let's hope it is 1966 again.

That was the only time when single-family housing starts showed a year-over-year decline of more than 30 percent and the economy did not fall into recession.
In all the other such declines, since the numbers started being collected in 1959, the economy either was in a recession — in 1960, 1970, 1973, 1981 and 1991 — or on the verge of one, in 1980.

Today's report on housing starts finds that in October, 102,800 single-family homes were constructed, for a seasonally adjusted annual rate of 1,177,000 homes. That was the lowest October since 1997, and the lowest annual rate for any month since December of that year. The decline from October 2005 was 31.8 percent.

Wall Street still believes that the housing slowdown...will do little damage to the economy. Hope springs eternal.

[me]

"somehow the Democrats will get the blame."

Probably not, to many of us that had our jobs sent to India, we never saw the recession end. Still waiting for all the jobs Catherine Mann said were coming.

[raphael]

Foreclosures have been increasing year-over-year. Like they say, "a liberal is a conservative whose home was foreclosed on". Elizabeth Warren writes about it on her blog occasionally.

John Edwards' Two Americas sppech still rings true.