Housing Boom is Over
George Harrison
Home construction sees biggest drop in months
October data evidence that rising mortgage rates are cooling housing boom
The Associated Press
Updated: 10:42 a.m. ET Nov. 17, 2005
WASHINGTON - Home construction in October plunged by the biggest amount
in seven months, providing dramatic evidence that rising mortgage rates
are beginning to dampen the housing boom.
The Commerce Department reported that construction of new homes and
apartments fell by 5.6 percent last month to a seasonally adjusted
annual rate of 2.01 million units.
The decline was double what analysts had been expecting and indicated
that rising mortgage rates are beginning to take a toll on housing, the
economy’s star performer in recent years.
Mortgage rates were climbing in October and last week hit a two-year
high of 6.36 percent for the nationwide average on 30-year mortgages.
Analysts believe that rates will climb even higher in coming months as
the Federal Reserve keeps tightening credit in an effort to make sure
that this year’s surge in energy prices does not spell broader inflation
problems.
The October decline in housing, the biggest since a 17.7 percent drop
last March, showed a slowdown in both single-family and apartment
construction. Single-family homes were being built at an annual rate of
1.68 million units last month, down 4.9 percent from the September
level. Construction of multifamily units fell by an even larger 13.7
percent to an annual rate of 390,000 units.
In a sign of potential weakness in the future, the number of building
permits issued in October dropped by 6.7 percent to an annual rate of
2.07 million units.
The weakness in construction activity was widespread across the country,
led by a 10.8 percent drop in the West, where building activity fell to
a seasonally adjusted annual rate of 511,000 units.
Construction activity was down 10.5 percent in the Midwest to an annual
rate of 333,000 units while construction activity fell 7.5 percent in
the Northeast to an annual rate of 172,000 units.
Home construction fell 0.5 percent in the South, down to an annual rate
of 998,000 units in October. Government analysts said the hurricanes
that hit Gulf Coast states did not have a significant impact on building
activity in the region last month.
Private analysts believe that rebuilding from the storms will boost
construction but that this positive effect will not be felt for several
more months.
© 2005 The Associated Press. All rights reserved. This material may not
be published, broadcast, rewritten or redistributed.
© 2005 MSNBC.com
mordacp...@hotmail.com
> Home construction sees biggest drop in months
> October data evidence that rising mortgage rates are cooling housing boom
> The Associated Press
> Updated: 10:42 a.m. ET Nov. 17, 2005
>
> WASHINGTON - Home construction in October plunged by the biggest amount
> in seven months, providing dramatic evidence that rising mortgage rates
> are beginning to dampen the housing boom.
I wouldn't want to be one of those idiots who bought a house on an ARM
or interest only loan.
You're going to see foreclosures in the housing market explode as
interest rates continue to increase.
James Of Tucson
neighborhoods that aren't established, and a far drive from the
cultural and economic centers of cities. Personally, such property
would be nearly worthless to me, as a residence, though I understand
there are plenty of people who can stand that kind of arrangement.
I place a much higher value on location, than is embodied in these
statistics of "new construction." Tell me about per-square-foot
pricing and inventory of houses built before 1980, that are within
walking distance of a university, an independent theatre, and a
second-hand book store. I suspect you'll find an order like that still
carries a high price tag.
I never imagined that a contemporary suburban residence that's maybe
within driving distance of a strip mall had any value in the first
place. If that's what the "bubble/bust" people are measuring, so be
it.
mordacp...@hotmail.com
James Of Tucson wrote:
> They seem to only measure new construction. The houses that are in
> neighborhoods that aren't established, and a far drive from the
> cultural and economic centers of cities. Personally, such property
> would be nearly worthless to me, as a residence, though I understand
> there are plenty of people who can stand that kind of arrangement.
>
> I place a much higher value on location, than is embodied in these
> statistics of "new construction." Tell me about per-square-foot
> pricing and inventory of houses built before 1980, that are within
> walking distance of a university, an independent theatre, and a
> second-hand book store. I suspect you'll find an order like that still
> carries a high price tag.
Your personal opinion, which is hardly relevant considering the real
world.
New housing purchases are outstripping sales of existing homes by far.
James Of Tucson
>New housing purchases are outstripping sales of existing homes by far.
Well, then great. The market is healthy, reports of its demise
exaggerated, yadda yadda.
Of *course* people are buying new construction, since decent existing
properties are owned and occupied by people who (A) aren't selling, and
(B) ask more for their property than the suburban crap sells for.
I'm not the only person in the world who places a high value on
location.
Harry Hope
mordacp...@hotmail.com
> >New housing purchases are outstripping sales of existing homes by far.
>
> Well, then great. The market is healthy, reports of its demise
> exaggerated, yadda yadda.
Since when is the housing market healthy when buyers are putting no
money down, taking out high risk mortgages and paying grossly inflated
prices? There was an article yesterday on how real estate companies are
paying the closing costs themselves just to get the houses sold and
increase turnover.
Another sign the housing market is in trouble is that a quarter of the
purchasing is being done by speculators and investors.
> Of *course* people are buying new construction, since decent existing
> properties are owned and occupied by people who (A) aren't selling, and
> (B) ask more for their property than the suburban crap sells for.
The problem with your contention is that existing homes are being sold.
Just not at the same rate as new houses.
> I'm not the only person in the world who places a high value on
> location.
You're in the minority.
Otherwise, why are small towns in California, Florida, Texas and other
states with high rates of unemployment selling houses for much higher
than what the residents can afford? Doesn't sound like a good location
to me.
For an example, research the housing market in Bakersfield, CA. The
locals can no longer afford housing without going dangerously over the
recommended housing cost allocation for their income level.