Housing Starts Dive Unexpectedly in Nov.

[papau]

http://story.news.yahoo.com/news?tmpl=story&cid=568&ncid=749&e=5&u=/nm/20041216/bs_nm/economy_housing_dc

Housing Starts Dive Unexpectedly in Nov.

WASHINGTON (Reuters) - U.S. housing starts unexpectedly plummeted 13.1 percent last month, the biggest dive in nearly 11 years, as groundbreaking activity fell sharply across the nation, a government report showed on Thursday.

Housing starts slid to a seasonally adjusted annual rate of 1.771 million units in November from an upwardly revised 2.039 million clip a month earlier, the Commerce Department said. Starts have not fallen so precipitously since they tumbled 17 percent in January 1994.

Wall Street economists had expected starts to ease only slightly to a 1.980 million unit pace from the 2.027 million rate initially reported for October.

Low mortgage lending rates, which averaged around 5.7 percent in November, had been supporting the housing sector despite five short-term interest-rate rises from the Federal Reserve this year. <snip>

[bleedingheart]

1. ...and it starts...

[MrUnderhill]

5. Don't count on it.

Your post has been made by dozens of others over the last 1-2 years. "This is the prick of the needle that pops the bubble!".

This is still an historically very high number and is likely just a bit of volitility. Sales and permits are still very solid.

[izzie]

2. I have read that this is what keeps the country looking good

The housing market. It is just sort of added in in items you read so I am not at all sure what they are using for reason. What is up about this? Do you know?

[papau]

4. Do I know - no - but I suspect the beginning of not good news

Only the US Media accepts without screaming "liar" the statements of Bush/GOP/Snow re the economy and the borrowing - and the idea that borrowing $2 trillion for SS private accounts will be the end of even the US media saying nothing - but our media will to too late and too soft to stop anything.

This stimulus has been the moste wasted in my memory - GDP will still "grow" for a few more years -if I am correct - but the end result will not be pretty.

[papau]

3. Housing Starts in U.S. Declined in November by Most Since January 1994

http://www.bloomberg.com/news/economy/economies.html#

Housing Starts in U.S. Declined in November by Most Since January 1994
Dec. 16 (Bloomberg) -- U.S. home construction fell in November by the most in almost 11 years, suggesting housing will contribute less to the economy.

Housing starts plunged 13.1 percent to 1.771 million residential units at an annual rate last month, from a high this year of 2.039 million in October, the Commerce Department said today in Washington. The level of building permits, a sign of future activity, declined 1.5 percent to 1.988 million.

The level of starts was the lowest since May of last year, and the decrease from October was the largest since January 1994. Home construction declined in all four U.S. regions, suggesting a lack of pent-up demand. The National Association of Realtors expects new home sales to drop in 2005 after a record this year. <snip>

By region, starts fell 13.2 percent in the West to 468,000 at an annual pace; 19.4 percent in the Midwest to 312,000; 14.2 percent in the Northeast to 151,000; and 10.4 percent in the South to 840,000. <snip>

[Deja Q]

6. What the hell do they mean, 'unexpectedly'?!!!!!!!!

:grr: :mad:

The good jobs are are going away or offshore. That means people can no longer pay for them and out they go.

Additionally, the prices for new housing is ridiculously high, which neatly compensates for the low interest rates as far as the purchaser is concerned. Funny how that works in the end...

What is happening is obvious. Any "economist" worth his penny pinching machine should have clocked it by now that this was in the forecast.

I'm surprised the housing industry has remained floating for so long.

Well, so long.

[MrUnderhill]

7. "Unexpectedly" because

New home SALES haven't been dropping like this... and PERMITS to build those new homes are still strong. And rates are still low.

You would expect the first signs of a decline to come from the OTHER numbers, not "starts". Either sales would drop off and builders would be left holding the bag and slow down construction in response... or builders would see it coming ahead of time and would slow down the requests (permits) to build more homes in anticipation of slowing sales.

More likely it's a bit of over-volatile "noise".

[papau]

9. True - but a 5% drop in economic activity in this sector will be felt!

no matter how it is spun, it is not good news.

but the world is not coming to an end - yet!

:-)

[MrUnderhill]

11. Yes, but..

"starts" isn't really "economic activity" in that sector.

Well, I guess the people working on the home get paid and consider THAT economic activity, but there isn't an indication yet in a drop there (which would only be seen in builder reports).

We would need to see a drop in sales, or at least a prolonged reduction in starts, before it's any big deal at all.

Apparently, permits have outpaced starts six of the last eight months. Not a sign that builders are cutting back new home construction. In other words... likely a one month blip.

[enough]

10. In fact this is exactly what we are seeing at the local level.

I'm on the Planning Commisison of a township in southeastern PA where the land values are very high, developers drool, and the local subdivision ordinance is very strict on preserving open space. We always have developers circling around every large property that is still avaliable (and there aren't many left).

What I have seen in the last six months is an absolute dead stop in starts. Builders who have gone through the long, arduous, and very expensive (paying lawyers and engineers) process of getting approval and permits have simply not started building. And no sign that they are planning to start any time soon. No explanation. They just are not starting, even with all the permits in hand.

I don't pretend to know what this means, but it is an unusual pattern for us here.

[MrUnderhill]

12. That's likely just a regional variation.

"The five strongest months in the last 20 years have all come this year" and the last five months have all been around the high-water mark (until today of course).

But individual markets can vary substantially. We saw similar reductions (not stoppage, but conservative building) in VA (where I lived until last year). In that case it was (probably) builders seeing prices growing at 20% per year (and higher) and wanting to sell the property at the higher prices. It was also due to "slow growth" policies we had put in place. Remember that they don't just want to sell homes... they want to sell homes for a long time. They don't want their crews super busy for six months and then laid off... they want a smaller number of people continuously busy for extended periods of time. If they can't get new tracts of land... they make the ones they've got last.

[lastliberalintexas]

13. A regional variation happening in many communities

I agree that this report doesn't mean the bubble will burst tomorrow. But with the ever increasing rates, increasing unemployment, increasing bankruptcy and foreclosure filings, and the overpriced bubble we've been in for far too long, reports such as this probably do foretell the *beginning* of that bust cycle.

[spinbaby]

18. The builders are all busy…

In our area, at least, there's a bit of a contractor shortage because so many of them have gone south to help repair Florida.

[KingChicken]

8. Don't get too anxious on one item, however housing is only one of many..

We have economic missiles coming in from all directions, and it all stems from the federal and budget deficits, lack of innovation, selling off of valuable intellectual resources to other countries, and a huge, yet gradual shift in economic power from the working poor and lower middle classes to the wealthy.

We are left with an illusionary hacienda economy in which many people will join the inescapable "working poor" class. Let's see what happens...

[Tace]

14. Papau Et Al -- Have You Seen The AP Story On "Rampant" Insider Selling?

The Associated Press reports that corporate execs, including those in the homebuilding industry, are dumping stock. Here's a link from Mike Ruppert's site that includes commentary from Ruppert, whom some consider alarmist. I'm not so sure.

Edit: Adding link, duh:

http://www.fromthewilderness.com/free/ww3/121504_insider_selling.shtml

[MrUnderhill]

15. I don't see the link... but

when you look at how "insider selling" gets reported, this isn't a big deal. Especially in a rising stock market (and "especially especially" when SO many of those stocks have been down for a few years).

It's most likely executives exercising stock options. Not really an indication of lack of faith in their company.

Edit - ah... there it is. :-)

In the article, the example given ("Avocent") is a good example. They even hint that options may be the reason for it, but then show ignorance of HOW such transactions get reported. There may not have been a SINGLE insider actually "selling" ANY of their holdings. But that fact is ignored.

[Tace]

16. I Hope You Are Correct, And Not The Doomsayers : )

[MrUnderhill]

17. In my previous "edit"

I think I added it after you posted, so I thought I'd put it in a reply.

"In the article, the example given ("Avocent") is a good example. They even hint that options may be the reason for it, but then show ignorance of HOW such transactions get reported. There may not have been a SINGLE insider actually "selling" ANY of their holdings. But that fact is ignored."

[papau]

19. It is an unusual difference between insider buying and selling - but

not a worry - yet

I would guess that it is tax planning option excercise and selling program result - as in the rich get richer.

But the lack of insider buying is the worrisome side of the report.

I actually put out a paper in 1968 that showed that technical indicators suck - timing the market based on things like insider selling just does not work - or at least it did not back then! But it does make one go hmmmmmmmmm ??????

That said, I would feel better about this Xmas rally if the insiders were putting a few dollars away in company stock. But we will need to wait for a few months to see if this is a trend - and even then if insiders continue to not buy, it may reflect current payroll bonus action rather than their anticipation of the economic future.

[kostya]

20. People often overlook the fact that options are exercising

just because they are coming up on their expiration date. If you held options that were above water, even a buck, you'd damn well exercise them before they expired. Furthermore, it's trickier for insiders since they only have certain windows of opportunity to sell in order to avoid any appearance of selling on non-public information. - K