Thursday, October 21, 2010

New Home Construction Continues to Limp Along in September

By Mark J. Donovan

The Commerce Department recently reported that U.S. home construction for September increased an overall mere 0.3% over the previous month, though up 4.1% from September 2009. Single family home construction drove the overall increase, with an increase of 4.4% in September 2010. New construction permits, however, dropped 5.6% during the same timeframe. The National Association of Home Builders remains negative on the home construction market due to lack of buyers, depressed or still falling house prices, and tight mortgage lending practices.

None of this news should be surprising with 10% unemployment, impending higher income taxes for all, and lack of clarity on health insurance costs in the coming year. Until unemployment starts to drop, and there is clarity on tax and health insurance costs, buyers are likely to stay where they are; on the sidelines waiting and watching the U.S. economy for signs of improvement.

Even when there is clarity and positive signs in the U.S. economy it still may be years before the housing market fully recovers. The bottom line, there is simply years of excess housing inventory on the market or abandon. Until this excess inventory is either consumed or destroyed, home construction will most likely continue to limp along.

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