November housing starts dropped 19% to 625,000, the lowest level since the Commerce Department began keeping records in 1959.
According to MarketWatch, economists had predicted a seasonally adjusted pace of 725,000 in November.
New housing permits were also lower, coming in at 616,000 or 48% below November 2007.
The market reacted positively to the news with home builder ETFs outpacing the S&P 500. The slowing in new housing starts will enable the industry to work off unsold inventory faster. The homebuilders are up nearly 50% since late November.
The SPDR S&P Homebuilders ETF (XHB) is an equal weighted fund that owns US homebuilders such asToll Brothers and Pulte Homes. The fund also owns housing related stocks such as Home Depot, Lowesand Sherwin Williams.
The Dow Jones U.S. Home Construction Index Fund (ITB) includes companies that are constructors of residential homes, including manufacturers of mobile and prefabricated homes.