Barely feels like an economic recovery?.. says most home builders! Almost two years after the recession ended, the swiftness of construction is inching along at less than half the level considered healthy. Single-family home building, the bulk of the market, has dropped 11 percent in that time. And there’s no sign it will improve soon. Builders are under pressure to struggle with waves of foreclosures that have forced down prices for previously occupied homes. The limitation is weighing on the economy.
Though new homes represent a small portion of overall sales, they have an enormous impact on the economy. Fewer new homes mean fewer jobs. The Commerce Department said Tuesday that new-home construction plummeted last month to a seasonally adjusted rate of 523,000 homes a year. A big drop in unstable apartment-building construction pulled down the monthly figures. Tornadoes and flooding also disturbed construction projects throughout the South.
If the pace doesn’t improve, this year could end up with fewer new homes than last year and only slightly more than 2009 which were the two worst years on records dating back a half-century. Those two years profited from a temporary home-buying tax credit.
Recently the Dow Jones industrial average fell by more than 150 points before getting better more half of its losses to end the day down 68 points. Nearly every major homebuilder stock dropped. Stocks also traded lower after Hewlett Packard downgraded its earnings outlook for the rest of the year, and the Federal Reserve said temporary parts deficiency out of Japan led to the first decline in factory output in 10 months. Higher commodity prices have increased the cost of nearly every building material, from lumber to roofing tiles to windows.