Highlights
Housing starts in January plunged again but the permits data—while worsening—were not as severe, suggesting that maybe some of the weakness was weather related. Starts continued to freefall in January with a 16.8 percent decline, following a 14.5 percent plummet in December. The January pace of 0.466 million units annualized was down 56.2 percent year-on-year and came in well below the market forecast for 0.530 million units. The drop in starts was led by the multifamily component which fell a hefty 27.9 percent while the single-family component fell 12.2 percent.

By region, the decline in starts was led by a monthly 42.9 percent plunge in the Northeast. Starts also fell in the other Census regions with the Midwest, down 29.3 percent for January; the South, down 12.8 percent; and the West, down 6.4 percent.

Permits also showed no signed of stabilizing, posting a 4.8 percent decrease in January, after a December fall of 11.1 percent. The January permit pace of 0.521 million units annualized was down 50.5 percent year-on-year.

However, permits were not as weak as starts. No matter how you look at it, the news is not good. But when starts diverge significantly from permits, it is usually weather related. So, while the level is likely to remain very low, we may see a weather-related bump up in multifamily starts next month.

The starts report for January has a likely quirk in the fall in multifamily starts. Still, the single-family component continues a downward spiral. The bottom line is homebuilders cannot resume significant levels of construction until supply is taken off the market. This is going to take some time. Today’s numbers will weigh on equities and could lead to flight to safety for bonds.

Market Consensus Before Announcement
Housing starts in December continued to be pushed down by oversupply of unsold homes on the market. Starts fell another 15.5 percent, following a 15.1 percent plunge in November. The December pace of 550 thousand units annualized was down 45.0 percent year-on-year. December's pace of new construction was the lowest since the starts series began in 1959. For the latest month, the fall in starts was led by the multifamily component which dropped 20.4 percent while the single-family component fell 13.5 percent. Starts are expected to remain weak due to still heavy supply on the market and lower demand from higher unemployment.

Housing starts Consensus Forecast for January 09: 0.530 million-unit rate
Range: 0.480 million to 0.570 million-unit rate

2009 Release Schedule

Released On: 1/22 2/18 3/17 4/16 5/19 6/16 7/17 8/18 9/17 10/20 11/18 12/16 Released For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov