Housing starts, permits at record lows
Key indicators plummet in October, spelling more bad news for the economy.
NEW YORK (CNNMoney.com) -- Housing starts and permits, key measurements of home construction, hit record lows in October, the Commerce Department reported Wednesday.
Housing starts reached an annual rate of 791,000 last month, the lowest level since the department began tracking starts in 1959. The rate tumbled 4.5% from the revised reading of 828,000 in September.
Building permits fell 12% to an annual rate of 708,000 in October, breaking the previous low of 709,000 in March 1975. The annual rate for September was revised to 805,000.
"Housing starts were a little better than expected, but unfortunately the expectations were so low, the bar was easy to cross," said Art Hogan, chief market strategist at Jefferies & Co. "I don't think there's anybody in the free world who doesn't know we've got a problem with real estate."
An annual rate of 780,000 housing starts was expected for October, according to a consensus of economist opinions from Briefing.com. Building permits were expected to fall to an annual rate of 772,000 in October.
There is no reason to believe that home building will improve any time soon, according to Mike Larson, real estate analyst for Weiss Research, an information provider for investors.
"Let's be honest, we have too many houses for sale out there to meet the current level of demand," said Larson. "If demand stays constant and construction is way down, then you're going to start working through the inventory [of existing homes]. It's a very, very challenging environment for the building industry here."
Concerns about the housing slump pressured stocks Tuesday after a survey of homebuilders showed sentiment fell to yet another low in November.
The National Association of Home Builders (NAHB)/Wells Fargo housing market index for November fell to a seasonally adjusted reading of 9, the lowest recorded level since the index began in 1985. That was worse than expected. Economists surveyed by Thomson/IFR expected the index to remain at 14, the previous record low set in October.