New housing starts in December plunged to their lowest level since 1991, signaling that homebuilding has contracted sharply from the boom times of recent years as a broad slump persists.
The U.S. Commerce Department said housing starts totaled an annual level of 1 million units during the month, lower than the 1.15 million that economists surveyed by
expected. The level was down 14% from November and down 38% from a year earlier.
Housing permits, a sign of future construction demand, reached an annual rate of 1.07 million in December, compared with the 1.14 million economists expected. That marked an 8.1% drop from November and a 34% plunge from the prior year.
The data were "certainly worse than the market was expecting," says Adam York, economic analyst with Wachovia.
"The housing starts are indicative of how bad credit market problems have affected the housing markets," York says.
Wachovia expects housing starts to fall further to the mid-900,000 range in 2008.