May
17

New Home Construction Tumbling Down

May 17, 2011

The housing market is saturated with existing homes for sale, which equates to less construction of new homes, as evidenced by the latest data.

The Commerce Department on Tuesday reported that U.S. housing starts in April were at a seasonally adjusted annual rate of 523,000. Compared to April of last year, that’s a 23.9 percent decline in new home construction, the biggest drop since October 2009.

April’s starts also fell 10.6 percent below the revised March estimate of 585,000. Experts had actually forecast housing starts to rise to 568,000 units.

construction hatHousing completions offered some better news. Privately owned housing completions in April were at a seasonally adjusted annual rate of 554,000, a 4.1 percent increase over the revised March estimate of 532,000. If course, that’s also 25.5 percent below the April 2010 rate.

Building permits, which can determine future activity, were at a seasonally adjusted annual rate of 551,000 in April, a 4.0 percent drop from March and a 12.8 percent tumble from April 2010.

It’s no wonder that builder confidence in the market for newly built, single-family homes remained unchanged for May.

According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), the index is at 16 and has been for six of the past seven months. A score of 50 indicates that builders see sales conditions as average.

“Builder confidence has hardly budged over the past six months as persistent concerns regarding competition from distressed property sales, lack of production credit, inaccurate appraisals, and proposals to reduce government support of housing have continued to cloud the outlook,” said NAHB Chairman Bob Nielsen.

“In addition, many builders in this month’s survey cited high gas prices as a further contributor to consumer anxiety and reluctance to go forward with a home purchase.”

And we all know that Chicago residents pay some of the highest gas prices in the nation.

“The HMI component index measuring traffic of prospective buyers increased by one point for the second time this year as prospective buyers show growing interest but remain extremely hesitant due to a number of factors,” said NAHB Chief Economist David Crowe.

“Asked to identify reasons that potential customers are holding back at this time, 90 percent of builders surveyed said clients are concerned about being able to sell their existing home at a favorable price, while 73 percent said consumers think it will be difficult for them to get financing. Clearly, access to credit for both builders and buyers remains a considerable obstacle to the revival of the new-homes market.”

Categories: Economy

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Tracey

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