In March, we all read how the housing market seemed to be ready to rebound, as there were more new home sales than there had been in awhile, and the number of foreclosures seemed to have dropped.
So, it was disappointing to read today that new U.S. housing starts and permits have fallen to record lows in April, per the Commerce Department. They said housing starts fell 12.8% to a seasonally adjusted annual rate of 458,000 units, which is the lowest since records have been kept, dating back to January 1959, from March’s upwardly revised 525,000 units. Compared to the same period last year, housing starts tumbled 54.2%. Analysts polled by Reuters had expected an annual rate of 520,000 units for April.
Also, new building permits dropped 3.3% to 494,000 units, the lowest since records started being kept in January 1960, from 511,000 units in March. Compared to the same period a year-ago, building permits plunged 50.2 percent. Of course, this reality is counter to a survey produced by the National Association of Home Builders, which indicated that home builders in the United States were hopeful that, what has become a three year slump, was nearing a bottom and market stability around the corner.
The question to ask if why anyone is surprised by these numbers. We received the report on the stability of banks during the week of May 11th, and that didn’t have the most encouraging numbers. Bank loans still haven’t returned to the level they were at three years ago. Another Federal survey stated that around 65% of domestic banks raised their standards for commercial-property loans, indicated by a drop in new townhouses and apartment buildings, which dropped to a rate of 90,000 from 167,000 the month before.
The main reason housing sales have started to increase is because of how far the price of foreclosed homes has dropped. In Florida, some consumers are able to buy $500,000 homes for less than $100,000; that is, if they can get a loan, as the banking system in Florida has also suffered many closures. It’s estimated that around 50% of all home purchases are of pre-existing homes.
This isn’t boding well for the construction industry, which supposedly saw a 2.8% increase in single family dwellings, but at the expense of more construction companies going out of business because they can’t keep up with expenses, insurance, and still not having enough work. The major housing firms seem to be weathering the storm pretty well, as stocks have remained fairly stagnant over the past three months, and one builder, Lennar’s Corporation, based in Miami, actually saw their bond rating increase, due to selling $400 million dollars of debt.
The housing market is obviously not out of the woods yet, but many analysts hope that it’s almost at the bottom. Next month we should know for sure.
T.T. Mitchell Consulting, Inc.
mitch@ttmitchellconsulting.com
Business Management Consulting
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The new homes side of this market crunch is reflected in our area also – where several developers raced to get homes on the ground after the BRAC commission left Fort Gordon off the closure list. Now there is standing inventory, monthly (if not weekly) price reductions, and incentives galore for buyers to get in to brand new homes for little or no money down. Of the 4,274 homes currently on the market in our area, only 945 are new construction – reflecting the issues you present where builders simply are not starting any new inventory. This number has gone down significantly monthly since mid-2008. There’s good news out there – especially if HUD/FHA come out with revised guidlines for the use of the $8,000 tax credit, but it’s months – if not at least a year – away.
Navy Chief, Navy Pride
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America’s population is growing rapidly the housing market must rebound or rise.
People will also always dream of moving south to the sunny places.
Buying houses in Buffalo NY or Detroit for me is a waste of time. It’s best to target the places whose attractiveness will never change… ie. chase the sun.
Jonk.
Good point, Joe. I don’t see this housing market as turning around any time soon. I’m lucky to live in central New York, where our housing market is stagnant at best.
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People are waiting to buy a house. It’s still too much thing going on the finance market together with GM, Chrysler and Ford bankrupt or not. But, I thing you President Obama is going to fix it, so the properties market and prices is going up again.
Naturally, I completely disagree…this is just a temporary spike on the way down the real bottom (99 prices)…
The market here is already starting to fall again. With most of our major manufacturers laying off and even government employees being laid off, it think we still have quite a way to go to get to the bottom.
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