The U.S. Department of Housing and Urban Development (HUD) reported 1,801 million housing starts in 2006, a 13% drop from 2005. The third and fourth quarters in 2006 showed steady declines, down 18.5% and 24.1%, respectively. Existing home sales declined by 8.4%, the biggest drop in 17 years.

Total construction spending in 2006 topped $14 billion, of which more than half ($7.7 billion) was residential spending. This was just 2% less then residential construction spending in 2005.

Bleak market predictions continue for new housing starts in 2007 with an additional forecasted 9.4% decrease. But forecasts indicate an end to the decline in 2007's fourth quarter and the dim light of an upturn in 2008 (see table: U.S. Housing Starts Forecast)

Among the Top 10 U.S. metropolitan housing markets in 2006 (according to number of residential building permits issued), only two cities recorded increases over 2005: Houston, Texas (+14.7%), and Los Angeles, California (+8.7%). Baton Rouge, Louisiana, experienced the largest percentage increase in building permits in the entire nation. Forty-fifth in the list of Top 50 markets, the city saw a positive 27% growth. Other growth markets in the Top 50 were Raleigh, North Carolina (+20%), Austin, Texas (+15.7%), and Charlotte, North Carolina (+14.3%), all southern states. Strong growth in the south isn't completely surprising, even in a battered market, since historically it leads the rest of the nation in new residential construction (see chart: U.S. Housing Starts (1959-2006).

Sources: U.S. Census, U.S. Department of Housing and Urban Development (HUD), National Association of Realtors, Reed Construction Data.