The starting of construction on new homes dropped 11% in July 2008 from the rate of the previous month, serving as a sign of the real estate market’s continuing troubles.
Based on this number, the annual estimate of new homes has been lowered to 965,000 as opposed to the over 1,000,000 homes that had been estimated in June. This new estimate places the building of new homes at the lowest rate since 1991, a time when the United States was in the middle of its worst recession in recent years. As an additional sign of continuing troubles, the construction of single-family homes has fallen more than multi-family homes to reach a low that has not been matched since 1982.
One of the problems that has contributed to this low is the overabundance of existing homes that are currently for sale. Between the increased number of foreclosures which originated from the subprime crisis and the number of homeowners who are selling their homes in favor of lower priced properties or rental property, the housing market has been flooded with properties which are available with no wait. New home builders that are erecting homes in hopes of selling them on the open market are facing waits of eight to nine months or longer before the homes sell; this long of a wait has not been seen on average since 1983.
Adding to the problem is the condition that the existing homes are in, with a number of the houses that are on the market having mold, insects, or structural problems. With so many buyers looking for properties that they can purchase immediately but finding so many homes in various states of disrepair, the housing market as a whole is facing a continuing crisis on top of the subprime worries. Buyers are choosing to focus their finances on attempting to repair an existing home than building or purchasing a new one. The irony is that many of the problems that they are facing in the housing market would actually be avoidable by building new houses instead of purchasing existing damaged or neglected homes.
Economists hope that the downswing in the building of new homes will soon be reaching its end, since the reduced number of permits being issued likely means that the excess of homes on the market will soon end. Estimates from organizations such as the National Association of Home Builders are hopeful that a turnaround either late in 2008 or in the first half of 2009. This turnaround would mean that by July of 2009 there will hopefully be a significant increase in the amount of new homes and specifically single-family homes that are beginning construction.
