Builders have been reluctant to build because demand for new homes has plunged and the supply of unsold property remained high. Reference my descriptions of apartment building motivation above. The latest data show new-home sales, for March, were down 36.6% from a year earlier. On Thursday, the National Association of Home Builders reported its index for sales of new, single-family homes slipped to 19 in May from 20. OK, so home sales are down, yet housing starts are up. So in addition to not being able to sell homes in a sluggish economy, we also have additional inventory added to supply - all the while homebuilders are struggling to survive with devalued inventory, excessive debt and banks and existing homeowners competing with them to dump thier inventory as the mortgage market locks up and banks squeeze lending. Remember, the financial barrier to renting is much lower than that of buying so this is a credible source of competition to the extant homeowners, builders and banks! The gauge is based on a survey of builders asked about prospects for sales.
"The magnitude of the housing bubble was unprecedented, and the corrective process promises to be a long and painful one," MFR Inc. Joshua Shapiro said of the NAHB data. "Hence, it is hardly surprising that builder sentiment is still languishing very near its all-time low." It's about time someone spoke with a modicum of common sense!
Earlier this week, luxury-home builder Toll Brothers Inc. released preliminary results of its fiscal second quarter and reported a 30% drop in home-building revenue. Its chief, Robert I. Toll, said current customer traffic is "the worst we've ever seen" and characterized would-be buyers as "scared." Can you blame them. I'm scared too, and I'm not even a prospective buyer.
Lehman Brothers analyst Michelle Meyer on Thursday said, "We think home sales won't bottom until the end of the third quarter, leaving builders gloomy and cutting construction through the end of the year."
Yet Friday's data showed building permits rose in April by 4.9% to a 978,000 annual rate in April. Analysts expected a drop of 1.8% to 910,000. March permits decreased by 5.0% to 932,000. Permits are a precursor to actual building. Oh yeah, that government datal. It's about as reliable as Paulson's bullshi,,, er, assertions.
April single-family housing starts decreased 1.7% to 692,000. Construction of housing with two or more units soared 36.0% to 340,000; (I'm glad that ain't my money) within that category, groundbreakings of homes with five or more units -- or multi-family -- were 40.5% higher.
Regionally, housing starts increased 24.4% in the Midwest, 3.6% in the South, and 18.5% in the West. Starts in the Northeast fell 12.7%.
Nationwide, an estimated 92,400 houses were actually started in April, based on figures not seasonally adjusted. An estimated 89,000 building permits were issued last month, also based on unadjusted figures.