Tuesday, March 17, 2009

Are the Housing Start Numbers Really a Surprise?

On the business channels, like CNBC, they are really talking up the surprise in the housing starts number. Are they really a surprise?

I wrote previously about how 80 percent of the housing crisis is contained in 35 counties. That is, 35 counties throughout the entire country. Much of the crisis is contained in a small number of geographic areas. Although, the unemployment situation is certainly becoming a factor nationally in he housing statistics. This would be especially true if you live in an area hit by major layoff.

The numbers reported today if looked at in the proper context are pitiful. The seasonally adjusted annual rate of 583,000 units is nothing to write home to "mama" about. This compares to the February 2008 rate of 1,107,000. Down 47 percent.

The more important building permits number rose 3 percent, to a seasonally adjusted annual rate of 547,000. This number does not indicate a surge in the housing market.

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Housing Starts Post Surprise Rebound, Up 22%

The number of new housing projects that builders broke ground on in February rose sharply, defying economists' forecasts for yet another drop in activity.

The Commerce Department reported Tuesday that construction of new homes and apartments jumped 22.2 percent from January to a seasonally adjusted annual rate of 583,000 units. Economists were expecting construction to drop to a pace of around 450,000 units.

February's pickup was led by a big increase in apartment construction.

By region, all parts of the country reported an increase in overall housing construction, except for the West, which led the housing boom and has been hard hit by the bust.

Overall housing construction activity fell to a pace of 477,000 units in January, according to revised figures. That was a little higher than first reported but still marked a record low.

Applications for building permits, considered a reliable sign of future activity, also rose in February by 3 percent to an annual rate of 547,000. Economists were expecting permits to fall to a pace of 500,000 units.

Even with February's rare burst of activity, housing construction is down a whopping 47.3 percent from a year ago.

The collapse of the once high-flying housing market has been devastating to the United States' economic health.

Its spreading fallout has contributed to big pullbacks by consumers and businesses alike, plunging the economy into a recession now in its second year.

The Obama administration has announced a $75 billion program to stem skyrocketing home foreclosures, which have dumped even more properties on an already crippled market.

More than 2 million American homeowners faced foreclosure proceedings last year, and that number could soar as high as 10 million in the coming years depending on the severity of the recession, according to a report last month by Credit Suisse.

Home mortgages are harder to come by because of the credit crisis and unemployment is at a quarter-century peak of 8.1 percent, factors that will make it difficult for the depressed housing market to snap back to full health.

Builders aren't optimistic that will happen any time soon.

The National Association of Home Builders' housing market index was flat in March at a reading of nine. That was one point above the all-time low reached in January. Readings lower than 50 indicate negative sentiment about the market. The index has been below 10 since November, reflecting the toughest market conditions in a generation.

Tighter lending standards for home mortgages, rising defaults and fear about the housing market's future have sidelined buyers, an absence felt acutely by homebuilders such as D.R. Horton , Pulte Homes and Centex .
Copyright 2009 Reuters. Click for restrictions.

URL: http://www.cnbc.com/id/29734541/

Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

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