US housing seeks new bottoms

Bringing down the curtains on the third year of the housing bust, the construction of new homes took another downturn in December 2008, dropping over 15 per cent to a seasonally adjusted annual rate of 550,000, making it the lowest on record according to the Commerce Department.

The department also said that permits to build single-family homes also dropped 12.3 per cent to 363,000 last month. Total permits including apartments dropped 10.7 per cent to a 549,000 annual rate, with the numbers representing record lows for both single-family and total permits.

Building permits are seen as a reliable indicator to the health of the housing market since they are less affected by weather conditions than the figures on housing starts. Reports said that builders have virtually mothballed operations till the financial situation improves.

Since June 2008, starts have plummeted 49 per cent, and compared to the peak of activity around three years ago, starts are down 76 per cent.

For the entire year of 2008, housing starts were down 33 per cent to 904,000, marking the lowest pace of new construction since the government started maintaining records in 1959. In 2007, 1.355 million homes were started, and 1.8 million were started in 2006.

Construction in 2008, reports said citing government data, were at the lowest level since World War II.

Builders, having mothballed new development, are now reported to be seeking a reduction in their inventory of unsold homes. In December, housing completions were down 5.2 per cent to an annual rate of 1.02 million, while completions for the whole of 2008 dropped 26 per cent to the 1.12 million, the lowest in 17 years.

Reports cited economists as saying that a bottom was developing in the housing market, and that an economic recovery could be starting to come about given that housing is once again becoming affordable, though other reports still maintained that recovery would be elusive at least in 2009 as improved affordability is not offsetting enough of tightening credit standards and mounting job losses.

Some reports said that the pace of housing starts would remain depressed almost until 2011.