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U.S. Builders Broke Ground on Fewest Houses Since '91

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  • U.S. Builders Broke Ground on Fewest Houses Since '91

    U.S. Builders Broke Ground on Fewest Houses Since '91 (Update3)

    By Courtney Schlisserman
    Enlarge Image/Details

    May 16 (Bloomberg) -- Construction of U.S. single-family houses in April dropped to the lowest level in 17 years, even as building of condominiums and townhouses rebounded.

    Builders broke ground on 692,000 single-family homes at an annual rate, the fewest since January 1991, the Commerce Department said today in Washington. Total housing starts jumped 8.2 percent to 1.032 million as construction of multifamily units rose 36 percent following a 35 percent drop in March.

    ``There may be signs that we are getting close to a bottom but we don't think we're there yet,'' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. ``The housing market still has a ways to go towards working off its problems.''

    Lower prices and other incentives have yet to revive demand for houses, indicating builders will need to come up with even more discounts to attract buyers. Stricter lending rules, job losses and growing pessimism about the economy signal sales will not rebound quickly.

    Treasuries dropped in the minute after the release, before retracing some of the losses later. Yields on benchmark 10-year notes rose to 3.85 percent at 9:56 a.m. in New York, from 3.82 percent late yesterday.

    Building permits, a sign of future construction, rose 4.9 percent to a 978,000 pace, reflecting gains in both single- and multifamily units.

    Economists Forecasts

    Economists forecast starts would fall to an annual pace of 939,000, according to the median 73 projections in a Bloomberg News survey. Estimates ranged from 875,000 to 1 million. Building permits were projected to fall to a 915,000 annual rate, according to the Bloomberg survey.

    Builders' confidence continues to flag. The National Association of Home Builders/Wells Fargo sentiment index fell one point to 19 this month, the group said yesterday. All three components of the gauge fell, with the reading on current sales of single-family homes reaching a record low.

    ``The trends are horrific,'' said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, who had the closest housing-starts estimate in Bloomberg's survey. ``There's just no reason things are getting any better. Why would you buy a house? Why would you spend money to buy a depreciating asset?''

    Regional Pattern

    Starts increased in three of four regions, led by a 24 percent jump in the Midwest. Construction rose 19 percent in the West and 3.6 percent in the South. Starts dropped 13 percent in the Northeast.

    Residential construction has subtracted from economic growth since the first three months of 2006, culminating in a 27 percent drop at an annual rate in the first quarter. That was the biggest decline since 1981.

    Home construction and property values ``seem likely to decline well into 2009,'' Federal Reserve Bank of San Francisco President Janet Yellen said May 13. She also said the risks around her forecasts are ``unusually large because of uncertainty'' about financial markets, housing and commodity prices.

    The economy expanded at a 0.6 percent annual pace in the first quarter, according to Commerce Department data. Economists surveyed by Bloomberg forecast growth from April through June would slow to a 0.1 percent pace and consumer spending would advance at a 0.5 percent rate, the smallest increase in 17 years.

    Toll Brothers

    Toll Brothers Inc., the largest U.S. luxury-home builder, said May 13 that revenue declined for an eighth straight quarter and that most housing markets remain depressed.

    The number of potential buyers at its developments was the ``worst we've ever seen,'' Chief Executive Officer Robert Toll said on a conference call.

    A jump in foreclosures, as values fall and adjustable-rate mortgage costs rise, is adding to concern. Foreclosure filings climbed 65 percent and bank seizures more than doubled in April compared with a year earlier, according to figures issued this week by RealtyTrac Inc.

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  • #2
    Where do I begin? I'll make this short.... It's bad.... REAL bad at the ground level. How this market and the financial markets have not taken an absolute catastrophic tumble yet is evidence of how good the "team" really is. Katrina should have been the straw that broke the camels back. Every day since then I have watched in awe as this thing continued, and continues to hang on. It makes me SICK to hold long position overnight because I know the reality. Over 70% of market movement happens overnight by the way.. just a thought. Stops will do NOTHING for you if it happens ferociously over night. It really amps the risk of an already risky occupation.

    Banks should be closing, companies in bankruptcies, bond raters in jail, bond insurance agencies running for the hills from claims, etc etc. based on the math. It hasn't happened yet and mathematically there are no logical explanations as to why not. Oh well.... What can you do? I keep trading to the long side but with just a larger contingency plan to get short hard if IT finally happens.

    A thought on the real estate market. Its not PRIME yet for investors. So what if you get a short sale on a house?? Only if you get it well below ACTUAL value (NOT APPRAISED VALUE!!!!) would it be worth it. And even then you will be sitting on it more than likely paying property taxes and other general expenses while the credit market recovers before you get a buyer. There is simply no buyers right now because there is no money to lend. People can't get that part for some reason. The margin has all but disappeared for profit in these flips. Like I said you have to be in it WAY below actual material value. You want to talk about supply in demand??? We have more houses that inhabitants currently in my part of Florida. The only way for it to balance out is a large influx of people moving here or demolition of said properties. Figure that one out! My point is.. Foreclosures, from an investors point of view, are not what they were 6 years ago. Please keep your guard up if you are looking to invest. I surely don't mean to scare people out of it, just keep your eyes open.

    ...Didn't I say this was going to be short??? LOL :) :rolleyes:
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