WASHINGTON (MarketWatch) -- The collapse in the housing industry accelerated in January, as construction on new U.S. housing units plunged 16.8% to a seasonally adjusted annual rate of 466,000, the Commerce Department reported Wednesday, far below the weakest levels of construction in the post-World War II era.Unfortunately the blogger picture functionality appears to be down right now, but if you want to see what the data looks like Calculated Risk has a handy chart available. CR colloquially calls these trends 'cliff diving'. You can see why.
How far has housing starts fallen? In 2005 there were over 2 million homes build. At January's rate we would not break half a million. The industry is operating at 25% of what it was in 2005.
How much out of whack are we? The general consensus is that we have about 1.25 million too many houses. Supply has definitely outstripped demand. Some estimates suggest that it would take years for the market to hit equilibrium again.
The one upside is that building permits are up a tick this past month, which might bode well for the general economy. However, given just how bad the housing market is and is anticipated to be, whatever uptick we see won't be all that great, in my opinion.
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Yang, do you have some housing starts numbers prior to the bubble, e.g. 1995 to 1999, numbers that would show what a "normal" pace of housing starts should be?
http://www.census.gov/const/startssa.pdf
One thing to note is that the pace of housing construction during 2003-2007 is high, but not extremely so. For example, the 12-month of housing construction was higher during 1972 than it was during any 12 month period between 2003-2007.
Another thing to note is that during the 1991 recession housing construction bottomed out at 798K SAAR, which make the current month production of 466K SAAR all the more extraordinary.
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