NEW YORK (CNNMoney.com) — Housing permits fell more than 15% to an annual rate of 616,000 last month, the Commerce Department said, while starts slid nearly 19% to an annual rate of 625,000.
“[Housing permits and starts] are startlingly low and really underscore the degree to which builders are cutting back aggressively on construction,” said Mike Larson, a real estate analyst for the Weiss Group. “We still have too many homes for sale on the market.”
The Commerce Department was expected to report an annual rate of 700,000 building permits for November, according to a consensus of opinion compiled by Briefing.com. Permits, which can be a useful indicator to gauge the near future of the housing market, reached a 730,000 rate in October, the lowest level since March 1975.
Housing starts were expected to come in at an annual rate of 730,000 for November, according to economist consensus from Briefing.com. That’s down from 771,000 during the prior month. The new annual rate for starts was the lowest since the department began tracking the data in 1959, and was down about 50% from the 2005 peak.
Paul Kasriel, director of economic research at Northern Trust, said he expects the housing construction market to bottom out sometime next year, though he admitted that the declines have already exceeded his initial expectations.
“We still have an excess supply of houses, both existing and new,” said Kasriel. “In all candor, I’m surprised – with all the excess supply – that we’ve been building any [new houses].”
While the declines in construction are painful for the economy, Larson of the Weiss Group said it is the only way to work through the excessive supply.