Looking at the latest numbers coming out of the housing industry, it’s not a surprise that yesterday’s report on home builder sentiment showed a somber mood among builders.
Housing starts in July managed a small increase of 1.7% to a seasonally adjusted level of 546,000, shy of the consensus offered by Bloomberg of 565,000. However, the rise occurred due to a 33% gain in the volatile multifamily category. Ex-apartments, single-family starts were down 4.2% to 432,000.
The more forward-looking building permits continues to reflect an industry that is not yet in recovery. Permits fell 3.1% in July to 565,000, the third drop in four months. And permits for single-family homes continue to slide, falling for the fourth consecutive month to the lowest level since April 2009.
Without the large tax credit that encouraged potential buyers to step forward, new home construction has dwindled recently amid stiff competition from late-model foreclosures and consumer worried about layoffs. The tax credit also moved some purchases forward, borrowing from those that might have occurred later in the summer.
Economic headwinds
The economic recovery has slowed and jobless claims are holding at high levels, negating much of the benefit from increased affordability that has sprung from record low mortgage rates and stable/declining prices.
Until the overhang from risky mortgage loans made in the middle part of last decade are removed (most analysts expect this to occur sometime in 2011) and unemployment falls to more reasonable levels, the new home market will continue to struggle.
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