Housing Starts plummeted today to the lowest level in 6 years, as builders continue to work out from under a massively bloated inventory of unsold property.
September starts were also revised downwards by 16%, from 5.9 to 4.9%.
The WSJ observed:
"The slowdown in housing this year stands in stark
contrast to the past five years, when the lowest mortgage rates in four
decades had powered a housing boom that pushed sales of both new and
existing homes to five consecutive records.
In a sign that starts will likely continue to fall,
October building permits dropped 6.3% to an annual rate of 1.535
million; the last month permits rose was January. Economists expected
permits would be up by 0.1% to 1.640 million. Permits decreased a
revised 5.2% last month to 1.638 million, compared with an earlier
estimated 6.3% drop to 1.619 million.
The housing weakness trimmed a full percentage point off economic
growth in the July-September quarter, when the economy expanded at a
tepid 1.6% rate. Housing is expected to continue acting as a drag over
the next year but analysts believe the adverse effects of falling sales
and construction cutbacks will not be enough to pull the country into a
The October 06 Housing Starts were the weakest
since July 2000, with Starts down 27% from the same period a year ago.
At present, the Housing situation will exert a much greater drag on Q4 GDP — even more of a drag than the negative 1.1% of Q3.
Bloomberg quoted Phillip Neuhart, an economist at Wachovia, who said: "This is a shocking number. The market is going to remain weak well into next year.”
New Residential Construction
New Home-Building Activity Falls to Lowest Level in 6 Years
WSJ, November 17, 2006 9:17 a.m.
U.S. October Housing Starts Drop to Six-Year Low
Bloomberg, Nov. 17
For the next edition of our series Blogger Spotlight: Tim Iacono and The Mess That Greenspan Made.
Tim is a software engineer in his mid-forties, living in Southern
California. He calls his blog is a "vain attempt to stave off a
mid-life crisis, and here’s hoping that it’s going to work."
This is part of our ongoing short list of excellent but somewhat overlooked
blogs that deserves a greater audience. Expect to see a post from a
different featured blogger here every Tuesday and Thursday evening,
Much has been made of the "tightening" by central
banks around the world, particularly the multi-year "baby-step" therapy applied
to short-term interest rates here in the U.S.
treatment was just concluded a few months ago under the watchful eye of Fed
Chairman Ben Bernanke – the baby steps weren’t the new Fed Chief’s idea, but he
is saddled with what they have produced.
Having wondered what effect these rising rates have had on the creation of both
consumer debt and new money, the construction of a chart showing all three laid
together is a task that has sat near the top of the To Do list around here for
It can now be checked off.
Nearly all of this data is available at the Federal Reserve website. The only
part for which one has to look elsewhere is the last six months of M3 Money
Supply – the central bank stopped divulging this data earlier this
The trend is still up -
Category: Blog Spotlight