Housing Starts Hit New Lows: 4 Reasons They'll Get Worse

Slower household formation, the credit crunch and recession signal more pain ahead.


The government reported Thursday that housing starts plunged to new lows in December, falling 16 percent from the previous month and 45 percent from a year earlier.

"Last month we wrote, 'This may be the worst housing report ever (data series starts in 1947).' This report was even worse," Pat Newport, economist from IHS Global Insight, said in a report. "Housing starts, single-family starts, and housing permits set record lows in 2008. These records will be shattered in 2009."

Here are four reasons why Newport sees an even-more-painful 2009:

1. "The household formation rate has slowed, as homeowners losing their jobs or homes to foreclosure have moved in with family."

2. "Rising foreclosure rates have driven down the prices of existing homes, pricing new homes out of the market."

3. "The credit crunch has made it difficult for builders with viable projects to obtain financing."

4. "The severity of the downturn and the stock market crash has reduced demand for long-lasting goods such as automobiles and new first and second homes."

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