New Construction Looking Up
The recession has taken a heavy toll on the building industry. States once reliant on residential and commercial construction have extremely high unemployment rates and many projects were halted while in progress. The focus of the government’s housing campaign has been to clear the decks of existing inventory and have combined in an all out effort to keep financially troubled homeowners in their homes.
As a result, building firms have been unusually idle, as housing starts have dwindled to record lows. In previously strong new construction states like Florida, Arizona, Nevada and California, requests for building permits have been few and far between.
In November, new home construction rebounded from a six-month low. Construction actually increased at an annual rate of 574,000 or 8.9% above October’s housing starts. Even with the November progress, housing starts remained 12.4% below year-over-year comparisons of 655,000.
New construction was strongest in the northeast where housing starts were up 16.4%. Housing starts rose 12.3% in the south, 3% in the Midwest and 1.9% in the west. October had been surprisingly disappointing for builders as homeowners waited to see if the homebuyer tax credit legislation would be extend or modified.
Once the December 1st cutoff was extended and the program expanded to include some existing homeowners, construction firms began to see some light at the end of the tunnel. These firms are hoping that Congress will take note and broaden the 2010 homebuyer tax credit. The 2009 bill was extended to cover homes closed before the end of June.
The November startups gave builders hope. However, the industry remains mired in high unemployment. The industry’s suppliers have also been affected and inventories are at alarmingly low volumes. Prices for building lots and for land for new developments are favorable but most construction is not speculative.
In 2009, housing starts peaked in the summer with July setting the bar. Normally, new starts are lower in the winter months.
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