The March report on housing construction was even worse than economists expected. Starts on construction of homes fell twice as much as expected. They dropped 11.9% in March from February, leaving them at their lowest point since 1991. A big part of the decline was starts on multifamily dwellings, which tend to fluctuate a lot. Analysts say the number to pay attention to is the decline in starts on single-family homes. That was off 5.7% from February, making it the 12th monthly decline in a row. Believe it or not, single-family starts in March were 63% below their record level of January 2006, when they were going at an annualized rate of 1.84 million.
David Rosenberg, North American economist for Merrill Lynch, says this is “turning out so far to be among [the] worst housing cycles in recorded history.”
Amid such gloom, it might seem strange that a new Reuters/Zogby poll has found that a majority of Americans think this is a good time to buy a house. But the two things aren’t necessarily contradictory. The steep drop in housing construction is reducing the oversupply of unsold homes, which will eventually lead to a firming of prices. I’m not saying that the bottom for housing prices is here or near, but the pain suffered by carpenters today is going to translate into gain for homeowners sometime in the future.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.