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Highlights
It’s hard to believe that housing could go any lower, but housing starts in December continued to plummet. Starts fell another 15.5 percent, following a 15.1 percent plunge in November. The December pace of 0.550 million units annualized was down 45.0 percent year-on-year and was sharply below the consensus forecast for 0.615 million units. The fall in starts was led by the multifamily component which dropped 20.4 percent while the single-family component fell 13.5 percent.
By region, the decline in starts was led by a monthly 24.5 percent drop in the Midwest. Starts also declined in the South, down 22.2 percent, and the West, down 2.2 percent. The Northeast rose 12.7 percent.
Permits also continued in freefall in December, posting a 10.7 percent drop, following a 15.8 percent falloff in November. The December pace of 0.549 million units annualized for permits was down 50.6 percent year-on-year.
Today’s starts numbers point to a bleak economy, especially as jobless claims spiked for the latest week. But the silver lining is that homebuilders are facing the reality that inventories of unsold homes must be worked off before starts pick up. Meanwhile, construction jobs will continue downward and there will be collateral damage to spending for the likes of appliances, furniture, and other home improvement purchases. The fourth quarter is ending on a very sour note. December starts should be negative for equities and maybe provide a little lift to bond prices although bond markets are more nervous about oversupply.
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