Builders in the U.S. broke ground on the fewest new homes since 1991 last month, signaling that the economy will continue to erode in coming months.
Housing starts fell 6.2 percent in August to an annual rate of 895,000, the fewest since January 1991, the Commerce Department said in Washington. Building permits, a sign of future construction, dropped 8.9 percent to an 854,000 pace.
``The home-construction industry is still in a deep recession and will remain there probably for the rest of the year,'' said Patrick Newport, an economist at Global Insight Inc. in Lexington, Massachusetts, who forecast a decline to 893,000. ``There are just too many houses on the market.''
Stocks slid as banks hoarded cash, sending money market rates higher and threatening to worsen the credit crunch that has made it tougher for homebuyers to get loans. The housing and credit meltdowns that led to the collapse of Lehman Brothers Holdings Inc. may continue to subtract from growth for the rest of the year and into next.
Starts were projected to fall to a 950,000 annual pace from a previously estimated 965,000 in July, according to the median forecast of 74 economists polled by Bloomberg News. Compared with August 2007, housing starts were down 33 percent.
Stocks tumbled as bank lending seized up in the wake of the government's takeover of American International Group Inc. The Standard & Poor's 500 Stock Index lost 4.7 percent to close at 1156.39 in New York. Benchmark 10-year Treasury notes rose, pulling the yields down to 3.41 percent at 4:31 p.m. in New York.
Condos, Townhouses
Construction of single-family homes declined 1.9 percent to a 630,000 rate, today's report showed. Work on multifamily homes, such as townhouses and apartment buildings, dropped 15 percent from the prior month to an annual rate of 265,000.
Starts decreased in three of four regions, led by a 15 percent slump in the Northeast. Construction was down 14 percent in the Midwest and 7.4 percent in the South. The West showed an 11 percent gain.
Builders completed 961,000 homes at an annual rate last month, the fewest since September 1982.
Combined existing and new-home sales have declined 36 percent from their 2005 peaks. Nationwide, home prices have fallen 19 percent on average from their peak in July 2006, according to the S&P/Case-Shiller index of 20 cities.
The credit crunch spawned by the subprime mortgage crisis forced Lehman Brothers Holdings Inc. this week to file for bankruptcy, just a week after the government took over Fannie Mae and Freddie Mac, the two biggest buyers of mortgages.
Rate Decision
Federal Reserve policy makers yesterday left the benchmark interest rate unchanged at 2 percent for a third consecutive meeting. Chairman Ben S. Bernanke and his colleagues signaled they will continue to address market turmoil with emergency lending.
As banks tighten lending standards and confidence slumps, consumer spending is faltering. Retail sales in August dropped for a second month, Commerce reported last week.
Homebuilders remain gloomy. A report yesterday from the National Association of Home Builders/Wells Fargo showed confidence among U.S. homebuilders this month held near the lowest level since records began in 1985.
As home prices continue to fall, more and more Americans a forced into foreclosure as they owe more than their homes are worth. Stricter lending rules also limit opportunities to refinance out of adjustable-rate mortgages before they reset higher.
Foreclosure filings rose to a record in August, RealtyTrac Inc. said Sept. 12. One in 416 U.S. households got a default notice, was warned of a pending auction or was foreclosed upon.
Toll Brothers Inc., the largest U.S. luxury homebuilder, on Sept. 4 reported a fourth straight quarterly loss.
``Explosive energy price increases, rising unemployment an severe mortgage and credit'' conditions cut demand, Chief Executive Officer Robert Toll said on a conference call. ``Weak consumer confidence has kept many potential buyers from taking advantage of the current buyers' market.''
Showing posts with label drop in housing starts. Show all posts
Showing posts with label drop in housing starts. Show all posts
Friday, September 19, 2008
Thursday, November 1, 2007
Orlando New Home Market Gets Worse
Nov 1 - Orlando Sentinel Reports:
Home builders continued cutting back in the Orlando area this summer, as new-home starts plunged 47 percent in the third quarter compared with the same period a year ago.
MetroStudy, a Texas-based real-estate-research company, also said in its latest survey that the July-to-September home construction in Metropolitan Orlando was down 20 percent from the previous quarter.But the number of home buyers closing on their purchases, and moving into their new houses, in the four-county metro area slipped only 5 percent from the second to third quarters.
Economists and industry experts said the sharp drop in housing starts is painful in the near term but helpful in the long run because it means the inventory of unsold homes can be absorbed faster. It also means a rebound in the region's housing market might begin sooner, and perhaps be even stronger, than after previous downturns, they said."They are anxious to work their way through the inventory.
Now is not the time to be building," said Terry Eckert, a longtime Orlando-area home builder. Builders are smart enough to know the cyclical nature of the market, Eckert said, and most builders are not starting work on any homes unless it involves a confirmed sale with lender-approved buyer.
Eckert, a former president of the Home Builders Association of Metro Orlando, worked for years for major-production builders -- the companies that fill subdivisions rather than erecting custom homes on single sites. He recently became director of construction for Habitat for Humanity-Orlando, the charity that builds for families who ordinarily could not qualify for a regular home loan. In contrast to the area's conventional builders, Eckert's nonprofit group is on pace to build a record 17 single-family homes in the region by the end of its fiscal year next June 30.
But only the major commercial builders have the scale and financing to build homes in the volume required to meet overall demand, and the MetroStudy report released Wednesday showed that housing starts in the Orlando area during the third quarter fell 46.9 percent year-over-year to 4,851 units.Anthony Crocco, director of MetroStudy's Central and Northeast Florida divisions, said the sharp decline in Metro Orlando -- which comprises Orange, Seminole, Osceola and Lake counties -- is a reflection of "the slow sales paces and high cancellation rates of late summer and early fall." His survey of subdivisions showed that the number of homes sold and occupied in the third quarter totaled 3,850, down 29.8 percent from the same period in 2006 but off only 5 percent from this year's second quarter.
Orlando economist Hank Fishkind told builders, developers and Realtors last week that this housing downturn does appear to be different in Central Florida when compared with past housing slumps, in that home builders have slammed on the brakes harder than ever.That should help clear out the inventory of unsold homes and set the stage for a more robust rebound in sales of both new and used homes, perhaps in 2009, Fishkind said during his quarterly forecast for Stirling Sotheby's International Realty Global Gallery.
MetroStudy's report did, in fact, show a drop in the area's new-home inventory. Total inventory -- homes under construction, finished-but-vacant units and model homes -- totaled 10,412 at the end of the quarter, down 36.3 percent from a year earlier.But at the recent slow sales pace, that still amounted to a 6.6-month supply. And the critical finished-but-vacant category fell just 9.9 percent from a year ago, to 5,264 homes -- still, a sign that the large stockpile of homes is finally starting to get whittled down.
Home builders continued cutting back in the Orlando area this summer, as new-home starts plunged 47 percent in the third quarter compared with the same period a year ago.
MetroStudy, a Texas-based real-estate-research company, also said in its latest survey that the July-to-September home construction in Metropolitan Orlando was down 20 percent from the previous quarter.But the number of home buyers closing on their purchases, and moving into their new houses, in the four-county metro area slipped only 5 percent from the second to third quarters.
Economists and industry experts said the sharp drop in housing starts is painful in the near term but helpful in the long run because it means the inventory of unsold homes can be absorbed faster. It also means a rebound in the region's housing market might begin sooner, and perhaps be even stronger, than after previous downturns, they said."They are anxious to work their way through the inventory.
Now is not the time to be building," said Terry Eckert, a longtime Orlando-area home builder. Builders are smart enough to know the cyclical nature of the market, Eckert said, and most builders are not starting work on any homes unless it involves a confirmed sale with lender-approved buyer.
Eckert, a former president of the Home Builders Association of Metro Orlando, worked for years for major-production builders -- the companies that fill subdivisions rather than erecting custom homes on single sites. He recently became director of construction for Habitat for Humanity-Orlando, the charity that builds for families who ordinarily could not qualify for a regular home loan. In contrast to the area's conventional builders, Eckert's nonprofit group is on pace to build a record 17 single-family homes in the region by the end of its fiscal year next June 30.
But only the major commercial builders have the scale and financing to build homes in the volume required to meet overall demand, and the MetroStudy report released Wednesday showed that housing starts in the Orlando area during the third quarter fell 46.9 percent year-over-year to 4,851 units.Anthony Crocco, director of MetroStudy's Central and Northeast Florida divisions, said the sharp decline in Metro Orlando -- which comprises Orange, Seminole, Osceola and Lake counties -- is a reflection of "the slow sales paces and high cancellation rates of late summer and early fall." His survey of subdivisions showed that the number of homes sold and occupied in the third quarter totaled 3,850, down 29.8 percent from the same period in 2006 but off only 5 percent from this year's second quarter.
Orlando economist Hank Fishkind told builders, developers and Realtors last week that this housing downturn does appear to be different in Central Florida when compared with past housing slumps, in that home builders have slammed on the brakes harder than ever.That should help clear out the inventory of unsold homes and set the stage for a more robust rebound in sales of both new and used homes, perhaps in 2009, Fishkind said during his quarterly forecast for Stirling Sotheby's International Realty Global Gallery.
MetroStudy's report did, in fact, show a drop in the area's new-home inventory. Total inventory -- homes under construction, finished-but-vacant units and model homes -- totaled 10,412 at the end of the quarter, down 36.3 percent from a year earlier.But at the recent slow sales pace, that still amounted to a 6.6-month supply. And the critical finished-but-vacant category fell just 9.9 percent from a year ago, to 5,264 homes -- still, a sign that the large stockpile of homes is finally starting to get whittled down.
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