This morning the Census Bureau reported housing starts for December 2008. The number, 550,000 units, was considerably worse than the already expected number. Which means we have passed a milestone. We are now officially in the worst housing slump since the Great Depression.

Almost exactly a year ago, I wrote a diary entitle, The worst housing slump since the Great Depression? which noted that, at that point, the housing decline was on par with the worst since World War 2, and was likely to worsen.

Here's the data I cited:
In December 2007, an annual rate of 604,000 new single family houses were started. This is a dramatic decline of (-56.5%) from the all time high of 1,389,000 annual rate of starts only 17 months ago in July 2005.

There have been only 6 declines of greater than 50% magnitude since 1920, almost a century ago. With one exception (during the Vietnam war economic boom), every such decline has heralded a recession.

The graphs I included in that diary showed that from the peak of October, 1978 of 872,000 annualized starts, off (-57.5%) to 370,000 in April 1980, and off again (-61,2%) to 338,000 annualized housing starts in September 1981.

That chart showed that only two other times did housing starts fall more than 50% from their peak, which was 2,121,000 annualized units in August, 1950: off (-51,5%) to 1.037,000 units in December 1960, and again off (-61.2%) to 824,000 units in October

At that time, the housing decline was only becoming "the worst since World War 2." That's because housing starts declined 75% during World War 2, as the nation focused - obviously - on other priorities. From the period of 1926 through 1935, however, housing starts fell 90%.

For those who think I am being a "chicken little", please note I am not calling for "Great Depression 2" nor have I ever done so. I have ever since August 2007 said that we were going to experience a "Slow Motion Panic", as in, an old fashioned 19th Century style "bust", but in very slow motion. Exactly as is coming to be.
Additionally, let me note that the quicker housing starts get to the bottom, the quicker the economic rebound can begin. So there is some definite "good news" in today's number -- on the order of having an abcessed tooth pulled quickly rather than slowly.

Nevertheless, as of today's data, we have now officially fallen slightly over 75% from the July 2005 high. We have just surpassed the World War 2 decline. We are in the worst housing decline since the Great Depression.

[Note: I cannot upload graphs at my current location. I will supplement this blog entry with graphs later.]