The government reported Wednesday that housing starts hit record lows in October, falling 4.5 percent from September and 38 percent from year-ago levels. Permits dipped to record low levels as well, plummeting 12 percent from September and 40 percent from October 2007.
And Richard Moody, chief economist at Mission Residential, says the residential construction sector isn’t done breaking records yet. “Just as in the sporting world where, we are always told, records are meant to be broken, coming months will likely see starts and permits set new lows,” he said in a report.
The Good News: A decline in residential construction activity is essential to bringing supply and demand back in line, says Mike Larson, a real estate analyst at Weiss Research. Less residential construction activity leads to fewer new homes coming onto the market. “To get the supply of unsold homes down, you need declines like this,” Larson says.
The Bad News: But the slowdown in residential construction activity means less investment and fewer jobs in the sector. That’s bad news not just for the construction workers who may lose their jobs, but for the economy as a whole, which will take a big hit to fourth-quarter GDP as a result, Larson says.