construction spending, an important driver of the economy, has been in freefall for months. The construction industry has gotten so weak, spending in February reached its lowest level since the fall of 1999. New home construction is leading the retreat and has reached its lowest level since the government has officially documented its performance. Source of article – Construction sector continues to hold back more robust recovery by MoneyBlogNewz.
February as a bad month for construction
It has been years since the number of projects breaking ground in a month was as low as it was in February. There were fewer homes, apartments and government projects being started. Construction spending in February dropped 1.4 percent; it was the third straight month of decline. The construction annual rate of spending was at its lowest since October 1999 with February spending at $760.8 billion. The construction industry has been getting worse while the rest of the United States economy seems to be getting better. There are fewer corporations wanting to build office buildings, hotels and shopping centers still even though the recession is over. Nevertheless, the construction market has to deal with this. Half of the $1.5 trillion level that is considered "healthy" for construction was reached in February. It has been estimated that construction will not recover from the housing bubble that triggered the recession for another four years.
End to housing bubble means end to new homes
A 3.7 percent decrease in private residential construction occurred in February. It went down to $228.5 billion total. Because of the foreclosures and unsold homes, there were less single-family and multi-family homes created. Home inventory needs to go down to help new home construction. This is the only way it will get better. The National Association of Realtors states that existing home sales went down about 3 percent past year. In this same time frame, there was a 28 percent drop in new home sales. In February alone, new home sales dropped 16.9 percent, from an annual rate of 301,000 to 250,000 — the lowest level since the government started tracking the numbers in 1963.
Purchasing and building are both down
New home sales are necessary to the construction market. The Gross Domestic Product is part of this. The National Association of Realtors states that right now, buying a new home is about 29 percent more expensive than an existing home, which is not normal. About 4 percent of February home sales were foreclosures and short sales, which is hurting the market. The foreclosures have to end while the inventory of new homes needs to go down. Until this takes place, home builders will stop building homes. The recession was hard on the recession. Before it, 80 percent of builders needed financing. The National Association of Home Builders reports that this number dropped quite a bit. Now it is at 20 percent.
Information from
Associated Press
finance.yahoo.com/news/February-construction-apf-1467794995.html?x=0&sec=topStories&pos=8&asset=&ccode=
Market Watch
marketwatch.com/story/buyers-shun-new-homes-1301521568482
CNN Money
money.cnn.com/2011/03/23/real_estate/new_home_sales/index.htm
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