New home construction rebounded 6.7% in November following October's 13.7% monthly drop, which leaves overall housing starts down 25.5% from a year ago. Permits for new building fell 3% to a nine-year low, suggesting ongoing weakness in the new home market that may pressure the overall economy for at least the next quarter. Yet the slowdown in building hasn't depleted unsold inventory: the Commerce Dept. reports the glut of unsold homes remains equivalent to a 7-month supply, up from 4.5 months a year ago. Meanwhile, builder Hovanian Enterprises on Monday reported its cancellation rate jumped to 35% in its most recent quarter. Most economists don't expect the housing weakness to require the Fed to cut interest rates in the near term, however, given ongoing inflationary concerns exacerbated by yesterday's PPI report.
• Sources: Commerce Department release (.pdf), Wall St. Journal, Washington Post, Associated Press
• Related commentary: How Long Can Consumer Confidence, Earnings Weather the Housing Bust?, Housing Bubble and Real Estate Market Tracker, How Far Will Housing Drag Down The Economy?
• Potentially impacted stocks and ETFs: Hovanian Enterprises (HOV), Toll Brothers Inc. (TOL), Beazer Homes USA Inc. (BZH), Lennar Corporation (LEN), Centex Corp (CTX), KB Home (KBH). ETFs: iShares Dow Jones US Home Construction (ITB), SPDR Homebuilders (XHB).
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