US housing work falls 4.3% in Dec, with one-family off 9%

19 January 2011 16:33  [Source: ICIS news]

WASHINGTON (ICIS)--US home building activity fell by 4.3% in December from November, the Commerce Department (DOC) said on Wednesday, with the crucial single-family home sector down sharply by 9%.

In its monthly report, the department said that the number of housing starts in December was at a seasonally adjusted annual rate of 529,000 units, well behind the downwardly revised November estimate of 553,000.

The pace of home construction last month also was 8.2% below the December 2009 rate of 576,000 housing starts. 

At that time, the US housing industry was benefiting from a federal tax incentive programme for home buyers. When that stimulus expired in mid-2010, the housing market turned down again.

November 2010 had seen a healthy 3.9% gain in overall housing starts compared with October, including a strong 6.9% advance in single-family residential construction.

But Wednesday’s numbers for December activity indicate that the nation’s housing industry continues to bounce along the bottom, with prospects for a near-term recovery still uncertain.

On Tuesday this week, a survey of US home builders showed that they see little hope of a housing market recovery in the next six months.

The housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals, resins and derivative products such as plastic pipe, insulation, paints and coatings, adhesives, roofing materials and synthetic fibres, among many others.

The American Chemistry Council (ACC) estimates that each new home built represents some $16,000 (€12,000) worth of chemicals and derivatives used in the structure or in production of component materials.

While the number of housing starts for one-family homes fell by 9% in December, new construction on multi-unit apartment buildings was up sharply in the month, advancing by nearly 26% compared with November.

The gain in apartment construction is regarded by some economists as a negative signal for the overall housing sector, because rising demand for apartments in part reflects more families who have lost their homes to foreclosure and are moving into the rental market.

There was some relatively good news in the December data for building permits, with the department reporting a strong 16.7% rise in construction authorisations compared with November.

However, much of that advance was attributed to a nearly 61% jump in apartment construction, although single-family housing permits did show a gain of 5.5%.

Building permits are issued by local governments when contractors are ready to break ground and begin construction of a residential structure, so monthly permitting data are seen as a real-time indicator of the housing sector’s near-term prospects.

The disappointing decline in new home construction for December was in contrast to other recent positive indicators.

November sales of existing homes rose by 5.6%, while sales of new single-family residences were up by 5.5% in the month, and pending home sales showed a 3.5% gain as well.

In the survey of home builders issued on Tuesday, a key problem reported by contractors was their continuing difficulty in getting project development loans and operating lines of credit.

US Housing Starts

	Dec ‘10	Nov ‘10	Nov-Dec ‘10	Dec ‘09	Dec ‘09 to  Dec ‘10
US Housing Starts	529,000*	553,000*	-4.3%	576,000*	-8.2%

* Seasonally adjusted & annualised

($1 = €0.75)

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