Housing starts disaster

Anyone who wants to sugar-coat the housing industry's state of affairs better look at this morning's housing starts report. Construction of new single-family and multifamily properties plunged 14.3% to an annualized rate of 1.408 million units from 1.643 million units in December. The year-over-year drop was even more dramatic -- 38%. Not only was January's starts figure well below the forecast for 1.6 million, it is the WORST TO DATE for the down cycle in housing. It leaves starts at the lowest level since August 1997. Both single family and multi-family starts dropped.

Building permit issuance also dropped -- 2.8% to 1.568 million units from a revised 1.613 million. Permits declined for single-family homes, but increased ever so slightly in the multifamily sector. Speaking of revisions to December data, they were mild on the starts front (+1,000 units), and a bit larger on the permits front (+17,000).

I've been saying it for a long, long time: The housing boom was the biggest in U.S. history in terms of construction activity ... sales ... price gains ... and speculative buying activity. That has left us sitting with near-record levels of homes for sale -- condos, town homes, single-family homes, you name it.

We had "see-through" office buildings in the commercial real estate boom that ultimately went bust in the early 1990s ... and we have "see-through" condo buildings and subdivisions now. It will take quite some time to work through that inventory overhang, and one component of that are sharper cutbacks in new housing construction like we saw this month.