With Slow Starts and Confidence Low, the Housing Slump Drags On

April housing starts fell 10.6% from the previous month, to a seasonally adjusted annual rate of 523,000. Starts during the month were nearly 24% below the revised April 2010 rate of 687,000, posting the greatest decline since October 2009, according to data from the U.S. Census Bureau and the Department of Housing and Urban Development.

Both building permits and housing completions were down considerably when compared with April 2010 totals. Privately-owned housing unite authorized by building permits during the month were at a seasonally adjusted rate of 551,000, which is down 4% from the March rate and is 12.8% below 632,000, or the rate in April 2010.

The rate of housing completions rose 4.1% compared with the revised March estimate of 532,000, but fell more than 25% year-over-year.

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Also released this week was the National Association of Home Builders/Wells Fargo Housing Market Index, which showed similarly down results in builder confidence. In the market for newly built, single-family homes, the rate remained unchanged in May at a level of 16. (A level higher than 50 indicates that more builders view sales conditions as good than poor.

“Builder confidence has hardly budged over the past six months as persistent concerns regarding competition from distressed property sales, lack of production credit, inaccurate appraisals, and proposals to reduce government support of housing have continued to cloud the outlook,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. “In addition, many builders in this month’s survey cited high gas prices as a further contributor to consumer anxiety and reluctance to go forward with a home purchase.”

The NAHB/Wells Fargo index measuring current sales conditions and the index compiling prospective buyer traffic each gained one point in May, to 16 and 14, respectively. The traffic gauge, despite such a small gain, is now at its highest point since May of 2010.

View housing data from the Census and HUD.

View more on the NAHB/Wells Fargo housing index for May.

Written by Elizabeth Ecker

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  •  While a few home builder economists are discussing what they see as “shadow demand,” few are willing to discuss pent up supply.  Actual new home and existing home inventory is bad but shadow inventory is even worse.  Pent up inventory could prove even more discouraging.  The last category is buyers who want a new home but will not budge from their existing home until the supply environment is less buyer favorable.
     
    As long as supply is so large, no responsible housing leader believes that home values will go up any time soon.  With an economy which has no real overall job growth and no real overall compensation improvement, the housing market looks ugly for now and for the next year.
     
    How strange to write off an entire summer selling season before it even starts but that is where we are today.  Somehow the Administration wants us to believe that its housing report card for the last 28 months should not be all Fs. It is clear that they believe they are trying but the reality is things are miserable.  Grades are not based on efforts but rather results.

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