New Home Construction Plunges in February
Thursday, March 17, 2011
| New Home Construction Plunges in February New-home construction in February dropped 22.5 percent from the previous month, the lowest in nearly two years and marking the second lowest level on record, the Commerce Department reports. Builders broke ground on a seasonally adjusted 479,000 homes last month. Economists consider 1.2 million units a year a healthy building pace. Builders continue to feel downward pressure from a high inventory of nationwide foreclosures and the tightening credit on mortgage loans. Builders More Confident? The Commerce Department’s latest new-home report Wednesday comes on the heels of an index on builder sentiment that showed builders were feeling slightly more optimistic about the market. In fact, builder confidence in new single-family homes reached its highest level since May 2010, reported the National Association of Home Builders on Tuesday. The index of builder sentiment rose slightly to 17 in March--the first gain in four months. However, a reading below 50 indicates negative sentiment about the market; the index hasn't been above 50 since April 2006. Looking into the future, builders seemed more optimistic too. Builders’ sales expectations for the next six months also rose, increasing two points in March to 27, also at its highest level since May 2010, according to the index. "Builders are cautiously looking forward to the spring home buying season in hopes that improving economic conditions will help bring more buyers to the table," says NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. "However, the same factors that have been weighing down the market are still very much in play, particularly competition from short sales and foreclosures, consumers' inability to sell their existing home, appraisals that are coming in below construction cost due to the inappropriate use of distressed properties as comps, and restrictive lending conditions for both buyers and builders." Source: “New Home Construction Falls to Second-Lowest Level on Record,” MSNBC.com (March 16, 2011) and “Builder Confidence Edges Up One Point in March,” National Association of Home Builders (March 15, 2011)
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