Housing starts rebounded in February from a nine-year low, easing concern that the U.S. real-estate slump will worsen and threaten the economic expansion.
Builders broke ground on new homes at an annual rate of 1.525 million last month, up 9 percent from the prior month and more than economists forecast, the Commerce Department said today in Washington. Building permits fell 2.5 percent.
The numbers eased speculation that climbing defaults on subprime mortgages would put additional homes on the market, leading builders to halt more projects and fire workers. At the same time, swings in the monthly figures don't convey the stability desired by Federal Reserve policy makers, who meet today and tomorrow to set interest rates.
The South and West rose 18% and 26.4% respectively. These figures are the primary reason for the increase, as the Northeast dropped 19.7% and the Midwest dropped 14.4%.
Frankly, I have a hard time explaining these numbers. According to the latest new home sales report there is a 6.8 month supply of new homes on the market. In addition, new home sales were down 20% year-over year. Credit standards are tightening. And there are estimates of the subprime problems adding between 500,000 to 1.5 million homes to inventory. This is not the time to be adding to available inventory.
9 comments:
I used to work at Commerce, and it was shot through with political appointees. In the old days, they weren't above saluting and doing whatever they were told. Bet they are today, as well.
bigger fall when it happens...
Less expensive to build in the south so the numbers don't represent equal dollars.
Katrina replacement housing finally being built?
maybe for the cash flow
Perhaps there are enough people out there with cash in hand and unrealistic hopes about the future housing market that they are willing to build a new house. I agree with one of the other commenters - it just makes the coming problems worse. Still, I'm all in cash for the moment.
How much does it cost to build a home vs. what is someone willing to spend?
If the former is less than the latter, inventory will increase unless there are cheaper houses already on the market.
In my area many small-sized builders, those who develop 5 to 10 houses at a time, are desperate. They have finished all the projects they had in the pipeline and now either a) get a new job or b) hope the market turns around by the time the new homes are finished. They are literally betting the farm because they are tapping their existing credit lines to get these projects rolling. I don't know if that is a nationwide trend. But if a builder is building, he's unemployed.
The new starts you are seeing are for houses wherein the builders have already taken down construction loans. The way construction loans are structured,if they don't start the houses, the builders will run afoul of their lenders. Builders are rushing these final houses to the market in hopes of selling them before the market goes futher south. Note the drop in permits--they will not be building much of anything after this surge. The best way to think of this that it is a builder dead cat bounce.
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