Interesting Positive Nuggets in Yesterday’s Housing Construction News
Housing Construction Down 6 Pct. in Aug.
Tuesday September 19, 6:11 PM EDTWASHINGTON (AP) — Housing construction plunged in August, falling to the lowest level in more than three years as the once-booming industry showed further signs of a dramatic slowdown.
The Commerce Department reported Tuesday that construction of new homes and apartments fell by 6 percent, the third consecutive decline and a much bigger setback than analysts had been forecasting.
The weakness pushed the annual rate for construction down to 1.665 million units, the slowest pace since April 2003.
The nuggets:
….. Only the Northeast saw a gain in construction activity, a rise of 5.4 percent. Construction of new homes and apartments fell by 12.2 percent in the Midwest, 6.1 percent in the South and 5.5 percent in the West.
Where are the nuggets in that? First, the significance of the Northeast has picking up is that this region was experienced the earliest and sharpest home-price gains (I remember Worcester, MA going up 20%-plus in 2003 and 2004, and also started feeling the slowdown earlier than other regions. Now it appears to be turning around. If this reflects revived demand and not irrational exuberance, that means that the Northeast’s bottoming-out process took about a year to 18 months without big price reductions. If other regions where steep prices rises started later imitate this pattern, the housing market will recover without having experienced steep price declines.
The other “nugget” is that builders are clearly getting better at responding to market signals than they were in previous boom-bust cycles, and are willing to pull in their horns when they have to. Six to twelve months from now, assuming the overall economy stays fine (and there’s no compelling reason to believe it won’t be), there will be a lot fewer new homes coming on to the market in the other three regions; if demand picks up even a little, prices will hold steady.
