Homebuilding Slumps to 17 Year Low

There appears to be no end in sight to the housing crisis and, more broadly the recession of 2008. A government report issued Tuesday showed that builders broke ground on the fewest number of homes since March 1991, marking a 17 year low. The 11 percent decrease puts the annual rate of new homes built at 965,000, far below the 1.084 million pace set in June. Work began on 30 percent fewer homes than in July 2007.

Another troubling sign is the fact that building permits - a sign of builder confidence - fell 17 percent as well.

The hardest hit area appears to be the Northeast, where homebuilding is down 30 percent. The South and Western regions of the U.S. experienced a more modest drop at 8.2 percent. Still, that figure marks a 26-year low for homebuilding in the West. Surprisingly, the Midwest saw a 10 percent increase in the number of homes breaking ground.

The five largest U.S. homebuilders have certainly felt the effects, reporting a combined $1.08 billion in losses for their most recent quarters. As a group, the nations eight largest home builders have seen their revenues plunge by 37 percent.

This marks the tenth straight quarter that slower than expected homebuilding has negatively affected gross domestic product, shaving 0.6 percentage points off GDP in the second quarter alone.

Analysts blame the poor performance on a myriad of factors: lenders tightening borrowing standards in the face of tough economic times, borrowing cost skyrocketing along with the tightening standards, plummeting property values, a record number of foreclosures and a struggling economy leaving many underemployed or not employed at all.

Analysts, however, were not all doom and gloom. Many believe that the lack of new homes being built should be extremely beneficial to the housing market because of the large number of unsold homes on the market already. The median wait to sell a recently built home is currently 8.4 months, the highest wait time in 25 years and it is believed that the lack of homes being built will greatly reduce that wait time.

Source CNNMoney.com:

Housing building fell sharply in July to a 17-year low, a government report issued Tuesday showed.

Starts plunged 11% to an annual rate of 965,000 from a revised 1.084 million pace in June, according to the Census Bureau report. Economists surveyed by Briefing.com had forecast starts would fall to a rate of 960,000.

Permits - often seen as a sign of builders’ confidence in the housing market - tumbled 17% to an annual rate of 937,000 from a revised 1.138 million in June. Economists had forecast that permits would come in at 959,000.

Source: Economy in Crisis

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