Wednesday, March 16, 2011

New-home construction plunges in February

There is no secret here.  There are some many homes in the foreclosure pipeline and they are cheaper than new construction.  Until this supply is cleared home construction will be low volume.
Builders broke ground last month on the fewest homes in nearly two years, a reflection of declines in home prices and diminished demand that has made it difficult for them to compete.
The Commerce Department says home construction plunged to a seasonally adjusted 479,000 homes last month, down 22.5 percent from the previous month. It was the lowest level since April 2009 and the second-lowest on records dating back more than a half-century.
The building pace is far below the 1.2 million units a year that economists consider healthy.
Millions of foreclosures have forced home prices down and more are expected this year. Tight credit has made mortgage loans tough to come by. And some potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further.
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  1. Is there any hope that it will recover again.

  2. Benson,

    I think it will recover when current inventory and all the homes are in the foreclosure pipeline are sold. Then when this inventory is sold new home construction will increase.

    Basically, from 2000 to 2007 homebuilders over built, so now market place needs to slowly aborb these extra houses.