New Home Construction at Two Year Low

March 17, 2011 (Jeff Alan)
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Housing starts nosedived in February by 22.5 percent compared to January 2011, the lowest in two years and marking the second lowest level on record according to the New Residential Construction Report released by the Commerce Department.

Privately owned housing starts were at a seasonally adjusted rate of 479,000 units, which was 20.8 percent lower than a year earlier.

Single family housing starts for February were at a rate of 375,000 units, which was 11.8 percent below the January figure of 425,000 units. The February rate for units in buildings with five or more units was 96,000 which was nearly half of January’s total of 181,000.

Building permits dropped as well too. Permits authorized in February were at an annual rate of 517,000, which was 8.2 percent below January’s rate of 563,000 and 20.5 percent below February of 2010 which was 650,000

Building permits for single family homes were issued at a rate of 382,000, which is 9.3 percent below the January figure of 421,000. Building permits for buildings with five or more units was at a rate of 121,000 in February which was down from 123,000 units in January.

Building permits are a sign of future building activity and would indicate a further slowdown in future new home construction.

The report comes on the heels of the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) which indicated that builders were feeling slightly more optimistic about the housing market. The index of builder sentiment rose slightly in March to17, the first gain in four months and the highest level since May 2010. However, a reading below 50 indicates negative sentiment about the market.

“Builders are cautiously looking forward to the spring home buying season in hopes that improving economic conditions will help bring more buyers to the table,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. “However, the same factors that have been weighing down the market are still very much in play, particularly competition from short sales and foreclosures, consumers’ inability to sell their existing home, appraisals that are coming in below construction cost due to the inappropriate use of distressed properties as comps, and restrictive lending conditions for both buyers and builders.”

Builder’s optimism was on the rise as sales expectations for the next six months also rose, increasing to 27 on the index, also the highest since May 2010

What a difference a day can make.

Tags: housing starts, building permits, single family homes, NAHB, builders optimistic, builder sentiment, construction, distressed properties