Housing Starts Drop

Single-family housing starts dropped 11.2% in January and single-family permits fell 4% as the weather and builder inventories stalled new construction.The U.S. Census Bureau reported that single-family starts dropped from a seasonally adjusted annual rate of 1.25 million in December to a 1.11 million rate in January. Compared with the total for January 2006, which was the fourth-warmest January on record, starts were off 38.9%. Richard DeKaser, chief economist of National City Corp., said he believes housing starts have hit bottom but that he expects the pipeline of units under construction to continue to decline over the course of this year. The NCC economist said he also expects home sales to decline by 5%-10% this year after last year's 15% decline in total sales. "The bulk of the decline is behind us," Mr. DeKaser said. However, lenders have tightened their underwriting standards on subprime loans, and he projects further tightening as defaults rise. The turmoil in the subprime market will take its toll on the housing market, "but I don't think it is going to drive it into the ground," he said.