Housing starts hit all-time low

Washington —- New-home construction plunged to an all-time low in December, capping the worst year for builders on records dating back to 1959.

The Commerce Department reported Thursday that construction of new homes and apartments fell 15.5 percent to an annual rate of 550,000 units last month. That shattered the previous low set in November.

It was a much weaker showing than the pace of 610,000 that economists were forecasting and ended 2008 on a dismal note.

For all of last year, the number of housing units that builders broke ground on totaled just over 904,000, also a record low. That marked a huge 33.3 percent drop from the 1.355 million housing units started in 2007. The previous low was set in 1991.

The report also showed that applications for building permits —- considered a reliable sign of future activity —- sank to 549,000 in December, a 10.7 percent drop from the previous month.

The collapse of the once high-flying housing market has been devastating to the United States’ economic health. Its spreading fallout has contributed to big pullbacks by consumers and businesses alike, plunging the economy into a painful recession now in its second year.

Against that backdrop, mortgage rates have dropped to the lowest level in decades. But builders are skeptical about the prospects of a housing turnaround as unemployment continues to climb and business lending remains tight.

Eugene James, director of the Atlanta region for Metrostudy, a company that tracks housing starts and closings, said local starts have been down sharply for two years and might decline even more this year primarily because builders are having trouble getting financing.

“Builders are screaming and yelling and crying because they can’t get a construction loan from the financial institutions,” James said. “It’s hurting them. You’ve got builders out there that are out of inventory already in their subdivisions.”

He said local fourth-quarter data on starts and closings will be released next week, and “I am expecting starts to be at an all-time low once our figures come in.

“The big problem is people still aren’t buying,” James said. But “a year from now you’re going to be writing about an undersupply of housing available. When a few more people start buying homes, it’s going to deplete our housing inventory.”

Atlanta Journal-Constitution staff writer Kevin Duffy contributed to this article.

 Associated Press
HOUSING STARTS
New privately owned housing units started: 
Seasonally adjusted annual rate 
Graph tracks period from Dec. '07 to Dec. '08. 
Dec. '08: 0.550 million units
Source: Department of Commerce