Housing Starts Slip as Homebuilders Become Less Confident

Written By Brian Hicks

Posted June 16, 2010

double dip

There’s more bad news for the builders. In the aftermath of the home buyer tax credit, starts and permits have dwindled as the rush to beat the deadline boosted earlier sales figures.

According to the Commerce Department, housing starts fell 10 percent in May from April to a seasonally adjusted annual rate of 593,000 units, the lowest level since December.

Meanwhile, housing permits, a gauge of future construction, fell 5.9 percent in May from April to a seasonally adjusted rate of 574,000 units, in a sign new homes sales could begin to slide.

That has the homebuilders increasingly bearish…

From the AP by Alan Zibel entitled: Homebuilders less confident in recovery

Homebuilders are feeling less confident in the recovery now that government incentives for buyers have expired.

Their pessimism could drag on the economy, which may not benefit so much from the job creation that construction typically generates throughout various sectors.

The National Association of Home Builders said Tuesday its housing market index fell to 17 in June, sinking five points after two straight months of increases. It was the lowest level since March.

Builders had been more optimistic earlier in the year when buyers could take advantage of tax credits of up to $8,000. Those incentives expired on April 30, although buyers with signed contracts have until June 30 to complete their purchases.

Experts anticipate home sales will slow in the second half of this year. In addition, high unemployment and tight mortgage lending continue to keep many buyers on the sidelines.

The drop in activity is “a wake-up call to the fact that the market will struggle to stand on its own two feet without the tax credit,” wrote Paul Dales, an economist with Capital Economics. “The double-dip in both activity and prices that we have been expecting for some time appears to have begun.”

New homes sales made up about 7 percent of the housing market last year. That’s down from about 15 percent before the bust. Thanks to the tax credits, sales of new homes rose nearly 15 percent in April. That followed a nearly 30 percent surge in March, the biggest monthly increase in 47 years

But now that they are gone, “the reduction in consumer activity may have been more dramatic than some builders had anticipated,” said Bob Jones, a builder from Bloomfield Hills, Mich. and the Washington-based trade group’s chairman.”


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