Timmy and the housing market are pretty much in the same well. The headline number on housing starts showed a slight gain Wednesday, but anyone who thinks they hear a woof of recovery in that data is all wet.
For one thing, the modest 0.8% gain represents just one month, January, a notoriously fickle one for housing, since much of the country is buried under a foot of snow and frozen solid to start the year. For another, the gain was solely driven by multifamily starts, a notoriously fickle measurement, since it can be affected drastically by the start of just a handful of big projects in one month instead of another.
Single-family starts, the statistic that is most relevant to the health of the housing market, were off more than 5% in January. Sales of both new and existing homes remain weak; inventory of unsold homes is high; and inventory of vacant homes is at a record high. Any way you slice it, we’re looking at an exceptionally poor 2008.
The National Association of Home Builders is projecting housing starts will fall 27% this year, on top of their 30% slide in 2007, and new-home sales are expected to drop to a 25-year low of 632,000 units. It’s unlikely any turnaround would come until late in the year.
If there is a canine snout sniffing over the lip of the precipice, it might be glimpsed in the home builder’s confidence survey results this week; the index moved up to 20 from 19 a month earlier — not much given that any reading below 50 indicates a slipping market.
But there was an indication in that survey that builders have seen an uptick in traffic through their subdivisions in recent weeks, a necessary precursor to any increase in sales and starts down the road. Several participants in last week’s International Builders Show in Orlando, Fla., also reported traffic increases, although no one was saying anything good has come of it yet.
Bottom line: Watch multifamily dwellings… When they start going up, the overall market is on the upswing… Aren’t you tired of the naysayers and negative-Nancy’s out there?
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