Housing Starts Decline Further
Images for this post are temporaraly unavailable.
Weather & Economy Provide One-Two Combination. Not a Knock-Out Punch, But it Did Hurt
New housing starts edged lower in February as bad weather and a similar ongoing bad economy slowed residential building permits to an almost one-half million annualized pace. The continuing below normal results were anticipated, however. Further reduced new home sales numbers will not be a surprise in coming months. After all, if fewer are being built, fewer will be sold.
So what is normal? And when do we get there? And what does it take to get there?
The following table shows existing homes sales, new home sales and residential permits commencing in 2001 (in which 2002 was probably the last ‘normal’ market we had, following the recession of 2001 and prior to the significant below-market rates provided by then Federal Reserve Chief Economist Alan Greenspan). These data reveal several important insights into housing numbers.
- First, as far as housing sales numbers go, existing home sales are the dog and new home sales are the tail of the dog. A normal market will contain 5.68 existing home sales for each and every new home sale. (These are national statistics, so a local market growing jobs at an above-average rate will have a different ratio and vive versa).
- 100 new home sales will occur for every 135 single family permits issued (on average)
Which portends an estimated 671 thousand single family permits issued in 2010
- 100 new home sales occur on average for every 175 total residential permits (on average)
Which portends an estimated 870 thousand total residential permits issued in 2010 of which 199 thousand will be multi-family
|Existing Home Sales||New Home Sales||Single Family Permits||Multi Family Permits||Total Residential Permits||Existing Sales Divided by New Home Sales||Single Family Permits Divided by New Home Sales||Total Residential Permits Divided by New Home Sales|
2010-2011 Forecast: Fannie Mae, February 2010 Analysis: Stewart Title Guaranty Company
New home sales will rise as soon as employment increases. And that has yet to occur. The coming months will show tepid job growth. Thus, from a job driven perspective, 2010 is going to be less than normal. From a builder’s perspective, 2010 is going to be abysmal. But at least improving a little bit.