Combined sales of new and existing homes have fallen 36%.
Single-family housing starts fell more than forecast in September, plunging to the lowest level in a quarter century and indicating the real-estate slump intensified even before the recent credit meltdown.
Construction began on 817,000 houses last month, down 6.3 per cent from August’s 872,000 level that was lower than previously estimated, the Commerce Department said Friday in Washington. Building permits, a sign of future construction, dropped 8.3 per cent to 786,000 pace, the lowest level since November 1981.
Builders will find it difficult to lure buyers into the market after stock prices plunged this month and banks made it harder to qualify for a mortgage. Declines in construction are likely to continue to hurt economic growth well into 2009, extending the housing slump into a fourth year.
“The full impact from the financial meltdown is yet to come,” said David Sloan, a senior economist at 4Cast Inc in New York, whose estimate matched the lowest in the Bloomberg survey. “Housing will be a drag on growth into the middle of next year. The bottom is now looking further away than it did previously.”
Starts were projected to fall to an 872,000 annual pace from a previously estimated 895,000 million in August, according to the median forecast of 74 economists polled by Bloomberg News. Estimates ranged from 840,000 to 935,000.
Compared to September 2007, work began on 31 per cent fewer homes. Construction of single-family homes dropped 12 per cent to a 544,000 rate, the fewest since February 1982. Work on multifamily homes, such as townhouses and apartment buildings, climbed 7.5 per cent from the prior month to an annual rate of 273,000.
Starts of single-family houses dropped to record lows in three of four regions in September, led by a 24 per cent slump in the Midwest.
The biggest housing slump in a generation was showing signs of nearing a bottom when financial markets began to implode in September, leading to the government takeover of mortgage lenders Freddie Mac and Fannie Mae, the failure of banks and a $700 billion government rescue plan this month. Recent events are likely delaying any return to stability.
“These things are putting a new nail” in the housing market's coffin, David Seiders, chief economist at the National Association of Homebuilders, said in an interview on Bloomberg Television Thursday. “this sort of vicious feedback loop is still in play.”
Combined sales of new and existing homes have fallen 36 per cent from their peaks in mid-2005. Home construction has declined 64 percent from a peak in January 2006. The supply of unsold homes on the market remains above 10 months’ worth of sales, signaling homebuilding is likely to continue falling.
Home prices in major cities are down an average of 20 per cent from mid-2006, after nearly doubling in the prior six years, according to the S&P/Case Shiller index of 20 metropolitan areas.
