Christmas Eve came with a lump of coal for homebuilders.
A December 24th story reported by the Associated Press announced that November home starts dropped by almost 19%, much worse than already-dire projections and the steepest decline since March, 1984. Not only is the decline percentage at record levels, the number of housing starts and permits are also at “all-time lows, breaking records that were set last month.”
According to Market Watch, the November drop puts the seasonally adjusted annual rate of new starts at 625,000, which is “the lowest since the Commerce Department began keeping records in 1959. According to similar records kept elsewhere, it’s the slowest pace of construction in the post-World War II period.”
If you pull out the numbers on just single-family home starts, the news is similarly bad. The November drop was 16.9%, bringing the annual start rate down to 441,000. Another record.
“It is going to be a very cold winter indeed for homebuilders,” Joshua Shapiro, chief U.S. economist for forecasting firm MFR Inc., wrote in a note to clients Monday.
What’s there to celebrate with news like this? Well, not much, I suppose. I’m especially concerned about the job losses affecting so many in the homebuilding industry. Of course, this massive decline in housing starts is also creating its own debilitating affect on the overall economy. In better years there is typically 1.2 to 1.5 million housing starts, which has led to an annual positive economic impact, often exceeding $700 billion.
Therefore, with the news delivered on Christmas Eve, it’s not just the homebuilders who got a coal in their stockings; there were coals aplenty because the “trickledown theory” works fastest in the negative.
Is there a silver lining here?
Here’s one. The homebuilding process is notoriously backward and its practitioners are not prone to accept criticism or invite change. The industry and its leaders don’t tend to be self-critical or introspective. “We do what we do and that’s the way it is,” comes across as explanation of the past, forecast for the future and excuse for anything that’s wrong. The subconscious rationalizations might also have sounded like this: “You can tell by how busy we are that we’re doing things right. We may not be perfect, but you obviously need us.”
Well, the homebuilding industry is demonstrably not busy, so the good news is that homebuilders across the country are sitting around with time on their hands. Perhaps they will use this unintended furlough to think, read and reflect. Perhaps they will even be thinking about realigning our industry to more purposely serve the common good. Perhaps many will even come to believe that our industry must summon the will to build homes that are more durable, more energy-efficient, more beautiful, and more affordable.
I know it sounds farfetched, but I can’t help but dream for an industry awakening. It’s long overdue