US housebuilding slows dramatically
US housebuilding slows dramatically
By Eoin Callan in Washington and Doug Cameron in Chicago
Copyright The Financial Times Limited 2006
Published: November 17 2006 14:52 | Last updated: November 17 2006 14:52
The US housebuilding sector slowed dramatically last month as new home construction tumbled to a six-year low, according to figures released on Friday which contained troubling signs for the economy.
The oversupply of unsold houses discouraged building in October, with new home construction projects plunging 15 per cent to 1.5m - a level 27 per cent below the same month a year ago.
There was a clear indication of further weakness ahead for the construction industry as building permits for residential homes fell to the lowest level in nearly a decade after a drop last month of 6.3 per cent to 1.5m, while the number of permits issued in September was also lower than previously thought.
The fall in permits for new homes suggests the housing market has reached a critical point as builders abandon speculative residential developments to curb oversupply.
The largest US homebuilders do not expect the market to recover until early 2008, and have ended virtually all speculative building in a bid to clear inventories which extend more than seven months for single-family homes and more than eight months for condos.
The speed with which the market returns to equilibrium and normal building activity resumes is likely to influence the pace of economic growth in the months ahead.
Haseeb Ahmed, an economist at JP Morgan Chase, said: “These data unambiguously point to further large declines in residential construction that will likely subtract about a percentage point from fourth quarter GDP and will be a sizable drag on the first quarter as well.”
The Federal Reserve is cautiously optimistic the economy can absorb a sharp correction in the housing market, but is paying close attention to any signs that consumer spending is weakening in the wake of the year-long slowdown.
Large publicly-listed builders - which account for a quarter of construction - have been forced to raise discounts to shift unsold stock and are slowing construction after speculators exited the market earlier this year.
Don Tomnitz, president and chief executive of DR Horton, said recently that the industry was in the “early stages” of a downturn, adding: “The industry in general needs to build fewer homes.”
Bearish warnings from the housebuilder tempered hopes that the sector may have bottomed.
Mr Tomnitz has talked of a “bad psychology” in the market, with buyers fearful of suffering large falls in the value of their homes.
“I’m absolutely convinced there’s a pool of pent-up demand being created, “he said last week, adding: “I think in 2008 we’ll start to see a nice recovery in the housing market.”
By Eoin Callan in Washington and Doug Cameron in Chicago
Copyright The Financial Times Limited 2006
Published: November 17 2006 14:52 | Last updated: November 17 2006 14:52
The US housebuilding sector slowed dramatically last month as new home construction tumbled to a six-year low, according to figures released on Friday which contained troubling signs for the economy.
The oversupply of unsold houses discouraged building in October, with new home construction projects plunging 15 per cent to 1.5m - a level 27 per cent below the same month a year ago.
There was a clear indication of further weakness ahead for the construction industry as building permits for residential homes fell to the lowest level in nearly a decade after a drop last month of 6.3 per cent to 1.5m, while the number of permits issued in September was also lower than previously thought.
The fall in permits for new homes suggests the housing market has reached a critical point as builders abandon speculative residential developments to curb oversupply.
The largest US homebuilders do not expect the market to recover until early 2008, and have ended virtually all speculative building in a bid to clear inventories which extend more than seven months for single-family homes and more than eight months for condos.
The speed with which the market returns to equilibrium and normal building activity resumes is likely to influence the pace of economic growth in the months ahead.
Haseeb Ahmed, an economist at JP Morgan Chase, said: “These data unambiguously point to further large declines in residential construction that will likely subtract about a percentage point from fourth quarter GDP and will be a sizable drag on the first quarter as well.”
The Federal Reserve is cautiously optimistic the economy can absorb a sharp correction in the housing market, but is paying close attention to any signs that consumer spending is weakening in the wake of the year-long slowdown.
Large publicly-listed builders - which account for a quarter of construction - have been forced to raise discounts to shift unsold stock and are slowing construction after speculators exited the market earlier this year.
Don Tomnitz, president and chief executive of DR Horton, said recently that the industry was in the “early stages” of a downturn, adding: “The industry in general needs to build fewer homes.”
Bearish warnings from the housebuilder tempered hopes that the sector may have bottomed.
Mr Tomnitz has talked of a “bad psychology” in the market, with buyers fearful of suffering large falls in the value of their homes.
“I’m absolutely convinced there’s a pool of pent-up demand being created, “he said last week, adding: “I think in 2008 we’ll start to see a nice recovery in the housing market.”
posted by Carlos T Mock @ 2:23 PM
0 Comments:
Post a Comment
<< Home