Housing starts in 2009 worst since World War II

America's construction industry didn't shake its funk in 2009. It couldn't even groove like it was 1928. Yet there are signs the industry will begin to rebound in 2010.

In December, housing starts fell 4 percent from November's total, the Commerce Department reported Wednesday, a disappointing capstone to a year that was the worst for homebuilders since World War II.

Only twice in the postwar period have housing starts fallen below 1 million – in 2008 and 2009. Last year, builders started construction on only 553,800 homes, less than a third of the 2006 level. Even in 1928, when the United States had less than half the population it does today, homebuilders did better than that. (The comparison holds even though the government calculated numbers a little differently back then.)

This year looks more hopeful. The number of building permits jumped 11 percent in December over November's level, reaching their highest level since October 2008.

Builders "are getting prepared to respond to the stimulated demand from the [home-] buyer credit, as well as the expectation that the employment market will improve," says David Crowe, chief economist of the National Association of Home Builders in Washington, D.C. Contractors have to begin construction by January or February if they expect to be able to sell those homes by June, when the federal tax credit for homebuyers expires.

By then, the economy should be in full recovery and the home-construction industry can begin to rebound, Mr. Crowe forecasts. But "we're several years away from equilibrium production."