Housing Starts and Industrial Production Crumble

For those of you who want to delve into data, here is today’s press release about housing starts: Housing Starts Drop Again.

We are well past noting this as news. Our national obsession with home ownership was what propelled us into this mess, so it is only natural for the construction industry to be dire straits. Nonetheless a drop of 16.8% in one month, from December 2008 to January 2009, is an ugly testimony to the hangover we’ve created for ourselves. For the truly masochistic the drop for the year ended in January was a mammoth 50.5%. That’s ugly.

So let’s try to put a positive spin on this: housing prices will only firm up when the overhang of unsold inventory starts to diminish. This stunning drop in starts will help slow that inventory growth down. A few more months of collapse and the market should stabilize. Late 2009 or early 2010 looks like a good time to go house hunting.

That is if you have cash.

As for Industrial Production: the Fed’s press release is here: Industrial Production Falls 1.8%. Again there is little news here. The fall in output is more than most people were expecting and the downward revision for December is a bit of a shock. Overall the best we can say here is that we already know that companies are cutting back furiously as they try to keep in step with the drop in demand. I think we will see more contraction throughout the rest of the quarter as the excess inventories we saw at the end of last year are worked off. Then we will see production level off at lower rates by early summer.

Sorry, that’s the best I can do with these numbers!