Bloomberg reports Single-Family Home Starts in U.S. Fall to 26-Year Low
Oct. 17 (Bloomberg) -- Housing starts in the U.S. fell more than forecast in September as construction of single-family homes plunged to the lowest level in 26 years, indicating the three-year real-estate slump is intensifying.
Construction of single-family homes dropped 12 percent to a 544,000 annual rate, the Commerce Department said in Washington. Starts on all residential properties, including condominiums, slid to 817,000, below all 74 forecasts in a Bloomberg News survey.
Builders will find it difficult to lure buyers into the market after stock prices plunged this month and banks made it harder to qualify for a mortgage. Declines in construction are likely to continue to hurt economic growth well into 2009, extending the housing slump into a fourth year.
``The full impact from the financial meltdown is yet to come,'' said David Sloan, a senior economist at 4Cast Inc. in New York, whose estimate matched the lowest in the Bloomberg survey. ``Housing will be a drag on growth into the middle of next year. The bottom is now looking further away than it did previously.''
…Combined sales of new and existing homes have fallen 36 percent from their peaks in mid-2005. Home construction has declined 64 percent from a peak in January 2006. The supply of unsold homes on the market remains above 10 months' worth of sales, signaling homebuilding is likely to continue falling.
Home prices in major cities are down an average of 20 percent from mid-2006, after nearly doubling in the prior six years, according to the S&P/Case Shiller index of 20 metropolitan areas.
Prices Drop
Falling prices are contributing to the jump in foreclosures as Americans, trying to refinance adjustable-rate loans, find out they owe more than their homes are worth. The drop in prices also means owners can't tap home equity for extra cash, one reason behind the slowdown in consumer spending.
Homebuilders are still reeling. Lennar Corp., the second- largest U.S. homebuilder, on Sept. 23 reported its sixth straight quarterly loss as potential buyers struggled to get mortgages and rising foreclosures increased the supply of homes on the market.
``The weakness in the market actually accelerated as a result of increased foreclosures, weakened consumer confidence and tightened mortgage lending standards,'' Chief Executive Officer Stuart Miller said in a statement.
From MarketWatch Consumer Sentiment Plunges at Fastest Rate Ever
WASHINGTON (MarketWatch) -- In the midst of global efforts to shore up markets and economies, U.S. consumer sentiment plunged in October, according to a media report on the University of Michigan/Reuters index released Friday.
In a record single-month drop, the index fell to 57.5 in October, compared with a reading of 70.3 in late September. Economists surveyed by MarketWatch were expecting an October result of 64.5.
The expectations index declined to 56.7 from 67.2. And the current conditions index declined to an all-time low of 58.9 from 75.
While inflation has eased recently, daily headlines on the volatile stock market and credit crunch may have taken a toll on consumer sentiment.
Inflation expectations for 12 months rose to 4.5% from 4.3%, while five-year expectations decreased to 2.8% from 3%.
Earlier this week the government reported that U.S. retail sales fell 1.2% in September, the worst drop in three years and the third decline in a row, a further sign that the economy has sunk into a recession led by an exhausted consumer. And earlier this month, the government reported that the U.S. economy lost 159,000 jobs in September, the worst since March 2003.
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