Do Low Housing Starts Indicate the Slump Won’t End This Year?

Disappointing news from the Commerce Department today–housing starts hit their lowest level in 17 years last month.

Let’s just take a moment to mull that over: Seventeen years. And that wasn’t the report’s only low point:

  • U.S. homebuilder starts dropped to the lowest rate since 1991, falling 11.9 percent to a seasonally adjusted
    annual rate of 947,000. That’s 36.5 percent less than a year ago.
  • Building permits also dropped to 927,000 last month–a 5.8 percent decline and 40.9 percent drop from March 2007.
  • Multifamily unit starts also fell in March by 24.6 percent. The future doesn’t look much brighter–multifamily permits fell 5 percent.

The fact that new home completions hit their lowest level since December 1995 wasn’t a shock; we knew things were rocky in recent months.

However, the building permit news is particularly troubling because it indicates–as the low National Association of Homebuilders/Wells Fargo Housing Market index showed Monday–that the housing slump is far from over. (The NAHB index found that homebuilder confidence in the industry was lingering at a near-record low for the third consecutive month.)

The problem seems to be more widespread than ever, too: Starts declined in all four regions. In two–the Midwest and the South–housing starts reached their lowest level in years (the lowest since 1982 in the Midwest and lowest since 1993 in the South).

Most sources are in agreement: Today’s news indicates we’re still knee-deep in the housing slump.

But will this month’s round of negative reports prompt some sources–such as the National Association of Realtors, whose March existing home sales report is due next Tuesday–to revise their predictions that the slump will turn around in the second half of the year?

On April 8, NAR said in its housing forecast that sales would increase in the second half of the year–the later part of it, but still, the group is sticking to its second-half prediction.

But given today’s news, could that really happen? The start of the year’s second half, after all, is just a few months away …

What do you think?