Real Estate Bubble Busting??
U.S. housing starts drop 13.1% in November
By Corbett B. Daly, CBS MarketWatch
Last Update: 11:57 AM ET Dec. 16, 2004
WASHINGTON (CBS.MW) -- Housing starts in November plunged to their lowest level since May of last year and fell at the sharpest pace in more than a decade, the Commerce Department said Thursday.
Total housing starts fell 13.1 percent to a seasonally adjusted annual rate of 1.77 million in November, the department said. The level of starts was sharply below expectations, with economists polled by CBS MarketWatch having forecast 1.99 million for the month. See the economic calendar.
"This is a sharper-than-expected drop for housing by a long shot," said Robert Brusca of FAO Economics, adding that "it may be evidence that home buyers are affected adversely by the surging interest rates even though they often come back down again."
Still, economists warn that month-to-month swings in the starts and permits data may not be meaningful. It can take up to five months for a new trend in housing starts to be established.
In the past five months, starts have averaged a 1.94 million annual rate per month, down slightly from 1.95 million in the five-month interval through October. Read the full report.
Building permits, which are considered a forward-looking indicator for the home-construction market, fell 1.5 percent last month to a seasonally adjusted annualized rate of 1.99 million.
And economist John Ryding of Bear Stearns said he expects starts to rebound next month.
"The drop in housing starts in November is surprising in light of recent data on mortgage purchase applications and yesterday's homebuilders' survey, but we do not believe that this decline represents the beginning of a weakening in housing construction," Ryding said.
Applications for mortgages at U.S. mortgage banks fell a seasonally adjusted 1.0 percent last week, and the National Association of Home Builders said separately that U.S. homebuilders remain in good spirits in December. Read more about the mortgage applications. Read more about the homebuilders survey.
Still, shares of homebuilders fell after the Commerce Department release. Read more.
Housing starts dropped in every region of the country and in every major subcategory. Single-family starts fell 11.7 percent to a 1.44 million unit annual rate in November.
In the Midwest, starts fell 19.4 percent to 312,000 units, the lowest level and the sharpest drop since February 2003. In the Northeast, starts fell 14.2 percent to 151,000 units, the lowest level since January and the sharpest drop in two months.
In the West, starts fell 13.2 percent to 468,000 units, the lowest level since April and the sharpest drop since June.
In the South, the country's largest region, starts fell 10.4 percent to 840,000 units, the lowest level since June 2003 and the sharpest drop since April 2003.
Over the past year, total housing starts have fallen 13.8 percent.
In a separate report, the Commerce Department said the U.S. current account deficit widened for the third consecutive quarter to a record $164.7 billion in the three months from July through September. Read the full story.
Separately, Labor Department said Thursday the number of people filing for state unemployment benefits plunged last week to the lowest level seen since July. Read the full story.
Corbett B. Daly covers the White House and the Treasury Department for CBS MarketWatch in Washington.
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