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Housing in November: Another nonstarter
comments (0) December 16th, 2008 in Blogs
Richard Defendorf, contributor
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On Monday, the National Association of Home Builders released its NAHB/Wells Fargo Housing Market Index for December, which stayed at 9, the record-low reading it hit in November.
Designed to gauge builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor,” the HMI survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
Housing starts data for November, released Tuesday by the Commerce Department, followed the HMI’s path. New home starts fell to a seasonally adjusted annual rate of 625,000 from a downwardly revised level of 771,000 in October. The 18.9 percent drop is the sharpest on record since March 1984. What’s more, new-home starts for the month are 15 percent below the 740,000 predicted by Wall Street.
Applications for building permits, considered a reliable sign of future activity, fell by 15.6 percent to 616,000 from an upwardly revised figure of 730,000 in October. Economists expected an annual rate of 700,000 permits, according to a survey by Thomson Reuters. The housing starts and permit figures are at all-time lows, breaking records that were set last month, the Associated Press noted.
A Wall Street Journal article on the consumer price index, also released Tuesday by the Commerce Department, pointed out that the 1.7 percent drop by the index in November was the largest since the government started compiling the figures in 1947 and well in excess of the 1.3 percent decline Wall Street economists had expected.
The likely short-term consequences, the Journal says, are that “tumbling energy prices and the slumping economy are rapidly taking pressure off inflation and could even lead to sustained price drops known as deflation.” The Federal Reserve probably will respond today by slashing interest rates to record lows.
posted in: Blogs, business
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