Building of New Homes Down

by Oliver 20. October 2008 17:35
New homes construction fell bigger-than-expected in September as builders cut down production indicating that this year would break record lows for number of homes built in more than six decades.

The housing report released last week confirms that the nation is under pressure with a weak economy that that can be sustained if not resolved.

The Commerce Department reported Friday that construction of new homes and apartments fell 6.3 percent last month, a much bigger drop than the 1.6 percent decrease that had been expected. It pushed total production to a seasonally adjusted annual rate of 817,000 units. That’s the slowest pace since January 1991, when the U.S. was in a recession and going through a similar painful housing correction.

The drop in construction last month showed weakness in many parts of the country. Biggest drop was seen in the Northeast with 20.9 percent drop, where construction of single-family units declined to the lowest level on record.

In the West, construction slid 16.8 percent with single-family building reaching a record low there. The Midwest experience 5.6 percent gain that came from strength in apartment construction as single-family building also hit a record low in that region. Construction activity in the South was up a slight 0.5 percent.

Applications for building permits, considered a good sign for future activity, also fell sharply in September, dropping by 8.3 percent to an annual rate of 786,000 units, the weakest level since November 1981.

The housing industry, which enjoyed a five-year boom, is suffering its worst downturn in decades.

The weakness in housing, where prices have been falling sharply in many parts of the country, has triggered severe economic problems. The government has been forced to rush through a $700 billion rescue package for banks which have been hit with billions of dollars in losses from soaring defaults on mortgages.

Builder sentiment dropped to a record low in October, according to the latest survey from the National Association of Home Builders which said builder confidence had been shaken by the recent financial market troubles. Builders have been facing tighter lending standards as they try to get financing for new projects.
 
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