By AUSTIN NELSON

Housing starts in the U.S. fell to their lowest levels since the government started keeping statistics on the subject in 1959. The drop is staggering — almost 20% since October — and is another stark indication of the current state of the U.S. housing industry, not to mention the economy as whole.

As noted ad nauseum on this site, supply far outstrips demand in most of the country’s real estate markets. Homebuilders are being kept busy simply trying to sell the homes they’ve already built, tens of thousands of which sit empty where they stand, surrounded by bank owned properties and uncompleted projects. There is simply not enough demand to support continued building.

Housing starts will likely continue their decline as large nationwide homebuilders contract their operations and some even close their doors. The homebuilding industry will struggle to improve until unemployment eases, lending standards loosen up and the flood of foreclosed properties recedes. It will be years until we see these events unfold.

In the meantime, savvy investors and prospective buyers will stay far away from the remote suburban housing developments that litter the outskirts of our major metropolitan areas. While these houses are often huge and full of top quality amenities, they’re simply too far away for any but the retired and semi-retired to reasonably consider making their home.

Services are already spotty in these areas, and as the nation as a whole becomes more eco-conscious and fuel costs emerge from their current swoon, demand for McMansions in the exurbs will remain low, perhaps indefinitely.

By RYAN TAYLOR

Hardly anyone, it appears, is interested in buying a new house.

The commerce department reported this morning sales of new single family homes decreased by 5.3% in October to a seasonally adjusted annual pace of 433,000. That’s the lowest level since 1991. Sales are down a whopping 40.1% from October 2007 and the total housing supply reached 11.1 months. Most economists consider 6-7 months of supply to be healthy.

The news was not much better for new home values: Prices fell 12.2% to an average price of $272,300, down from $310,000 in October of last year. The month-over-month drop was particularly dramatic, down from $283,700 in September – that’s almost 5% in a single month.

In contrast, the median price fell to just $218,000, down from $234,300 last year. This gap between average and median prices indicates that more cheap homes are selling than expensive ones. Recent data show distressed properties make up almost half of current transactions, as investors try to snap up foreclosures at fire sale prices.

Meanwhile, higher priced homes are sitting on the market. Jumbo loans are increasingly  tough to get and many sellers are unrealistic about asking prices.

While activity nationwide fell steeply, regional data were mixed:

• Northeast: +22.6%
• Midwest: +6%
• South: -6%
• West: -18%

There are a few things that can be derived from these numbers.

First of all, markets that experienced the greatest appreciation from 2002-2005 are continuing to experience significant declines in new home sales. Florida, California, Arizona and Nevada were the boom states for many of the homebuilders at the peak of the market and they are now the most depressed areas.

Since the boom in the new home market was fueled by investors and speculators, homebuilders kept on building. Lax mortgage requirements created a seemingly neverending supply of buyers. Now that demand has dried up due to tighter credit markets and falling prices, builders are left sitting on huge inventories of homes as well as vacant land. Land was cheapest in the exurbs, well outside town, and job losses and a weakening economy are particularly damaging to these fringe developments.

Supply is out of control in the South and the West, but the Northeast and Midwest are experiencing strong buying activity as prices return to more affordable levels. Some areas, like Bloomington, Indiana and Lubbock, Texas are even seeing home prices rise.

Qualified and willing buyers have many homes to choose from right now. Few are opting to live far away from job centers, especially when those markets are the most distressed.

Despite slick marketing campaigns, giveaways and slashed prices, any prospective buyer still faces the very real risk of losing money on a new home starting the day you move in. This is a risk few should be willing to take with the roof over their family’s head.