Starts Continue to Plunge; Projected Declines for 2009

In October, according to the latest data released by the U.S. Census Bureau, starts in buildings with five or more apartments fell to a (seasonally adjusted annual) rate of  247,000. This is down 5.7%from a September number that was revised upward by 3.1% (at the same time the number for August was revised downward by 6.7%). 

Unadjusted for seasonal effects, total five-plus units started though October are running about 8%above the equivalent number for 2007. However, it's important to remember that the 2008 number includes the anomalous production spike in June, which was driven by a code change in New York City.

Meanwhile, the rate at which new five-plus permits were issued—often used as an indicator of future housing starts—fell another 6.4% in October, down to a seasonally adjusted 218,000. This is the fourth straight month of declines—including some very large ones—taking the five-plus permit rate down to the lowest number posted since March of 1994. This, along with continued pessimism expressed on NAHB builder surveys, has caused further downward revisions to  NAHB's production forecast. The forecast now calls for five-plus starts in 2008 to come out roughly where they were in 2007 (in the neighborhood of 280,000 units), but to then decline by 36% to 173,000 units in 2009.