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New home building slows
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Not surprisingly, new home builders are pulling back and not starting to build new home developments. Numbers released on October 17 by the U.S. Commerce Department reported that nationwide housing starts declined 6.3 percent to a seasonally adjusted annual rate of 817,000 units, the slowest building pace since early 1991.
While a slower home building pace may not sound like good news, it is a necessary step toward the eventual recovery of the housing market.
"Builders are doing all they can to bring supply and demand back into balance by limiting new production and offering substantial incentives to prospective buyers," said National Association of Home Builders (NAHB) Chairman Sandy Dunn, a home builder from Point Pleasant, W.Va. "Unfortunately, the heavy toll that today's financial-market woes are taking on consumer confidence is a major impediment to getting housing back on track as an engine of economic growth, and additional government help most likely is needed to help stimulate new sales activity."
"While lower than generally expected, today's numbers are not surprising in light of our latest builder surveys and evidence of persistently high inventories of new and existing homes, weakening home prices, falling payroll employment and declining consumer sentiment," noted NAHB Chief Economist David Seiders.
Regionally, starts activity was mixed in September. The Northeast and West each posted double-digit declines (of 21 percent and 16.8 percent, respectively), while the Midwest and South each posted modest gains (of 5.6 percent and 0.5 percent, respectively).
Permit issuance, which can be an indicator of future building activity, was down across the board in September. Overall permits fell 8.3 percent to a seasonally adjusted annual rate of 786,000.
