Construction of new homes drops a surprising 10.6% in October

[marmar]

from the LA Times:



Construction of new homes drops a surprising 10.6% in October
That's 30.7% down from the same month last year. Analysts had recently forecast a 1.7% rise in housing starts.

By Alejandro Lazo

November 18, 2009 | 6:32 a.m.


Builders curtailed construction of new homes sharply in October, according to a government report released this morning.

The pace of new residential construction fell unexpectedly by 10.6% to a seasonally adjusted 529,000 annual rate compared with the prior month and a 30.7% drop from October 2008, the Commerce Department said.

Analysts surveyed by Bloomberg News had forecasted housing starts to rise 1.7% to an annual rate of 600,000, the most since November 2008. The unexpected drop came as a deadline for the initial Nov. 30 expiration of a popular $8,000 tax credit approached. Congress this month extended the credit through April and expanded it to include move-up buyers.

The number of new building permits also fell in October by 4% to a seasonally adjusted annual rate of 552,000 when compared to the month prior and by 24.3% compared to October 2008.

Meanwhile, the number of homes completed in October increased 1.9% to a seasonally adjusted annual rate of 740,000 compared to the prior month but dropped 29.9% when compared to October 2008.


http://www.latimes.com/business/la-fi-new-homes19-2009nov19,0,7870063.story

[TwilightGardener]

1. There's a lot of deals to be had on existing homes--either prices are

dropped by the owners, or they're in foreclosure proceedings or bank-owned. Unless builders are offering new-home deals to match what's out there in existing inventory, it's not really surprising that people might put off building right now and just buy a home.

[WilmywoodNCparalegal]

2. Not surprised... I still think a lot of real estate is way overpriced

at least around here, in SE NC, coastal beach area. There are a lot of existing crappy homes (I'm talking about poor manufacturing, crappy finishes, etc.) for sale here. Then, you'll have homes that look great on the outside and inside cheap kitchen cabines and cheap bathroom furnishings.

I would love to buy, but to me the biggest obstacle is to manage to save a decent down payment (and my credit is crap, which is a problem on its own).

[hunter]

3. Who are these people who keep getting "surprised?"

It's like Lucy holding the football for Charlie Brown.

This Depression ain't over, it's just begun.

[David Zephyr]

4. That's good news to me because there is too much housing inventory right now.

.

[On the Road]

5. I'm Sure It's Partly Sentiment

but part of the reason is undoubtedly (as Joe Biden reminded us last night), that the builder are unable to borrow money for the projects.

[FarCenter]

7. There are lots of houses for sale

We are overbuilt, and there is a big cushion of vacant or for rent houses.

Builders don't need loans; they need customers.

[Fla_Democrat]

11. ding, ding, ding.. we have a winner

that the builder are unable to borrow money for the projects.

There's a lot of established companies, not just the 'new truck contractors' that are sucking wind right now.

[Renew Deal]

6. I'm surprised they didn't drop 90%

There's plenty of supply these days.

[BR_Parkway]

8. Surprised? Unexpected? - what world do these people live in? We've

got an oversupply in almost every market of homes, plus another oversupply of foreclosures that the banks haven't even gotten listed yet, we're still having record numbers of foreclosures, record numbers filing for unemployment, record numbers of long term unemployment, banks that won't lend because they're still trying to prop up their phony balance sheets and some analysts are "surprised" at the "unexpected" drop?

Weathermen get all the jokes about being able to keep their jobs in spite of how often they're wrong - apparently analysts not only keep their jobs but get mega bucks bonuses from the zombie banks that we're propping up.

Obviously, these would be the same idiots who didn't see that the economy of 70% consumer spending based on nothing but 125% LTV 2nd mortgages to buy Chinese made flat screen TV's and trying to flip real estate 5 times a year at a 300% markup each time was an unsustainable model.

[revolution breeze]

10. Following Katrina

Everyone with a hammer and a way to get building materials became a building contractor here in southern Louisiana. Construction boomed for about two years and people were buying new homes in areas that did not flood. Then the market just tanked. Now we have all these unemployed contractors with houses they can't sell.

[FarCenter]

9. Apartment and condo construction is tanking - single family not so much

Comparing Sept '09 with Oct '09, single family starts are down 6.8% and 5 or more unit starts are down 33.3%.

Comparing Oct '08 with Oct '09, single family starts are down 10.9% and 5 or more unit starts are down 78.1%.

Same story for permits and completions

First, since commercial projects take longer to get going and to finish, it was always expected that multiple dwelling unit buindings would lag single-family homes.

Second, there is no money available for commercial mortgages for residential apartment buildings and condos. These were largely financed by packaging the commerical mortages and peddling them to insurance companies, pension funds, foreign investors, etc. These have all been burned by losses on CMBS, and are not interested in being burned again. Much of the origination was done by small or regional banks, and their balance sheets are not healthy.

[Xithras]

12. There's a massive amount of nearly new inventory still sitting on the market.

Buyers today can often pick up a home that is only two to four years old for a substantial savings over the cost of a new home. In my area, the standing estimate by real estate experts is that we have an EIGHT YEAR inventory available, based on traditional sales figures. Nearly all of that inventory is less than 5 years old, and most can be purchased for about 25% less than the cost of a brand new home, even when that new home is only a block away.