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Home Building Remains Slow

[Aug 22, 2007.]


A report from the U.S. Commerce Department indicates that home building continued to be slow at summer's start.

The report shows that construction of new homes and apartments decreased in July by 6.1% when compared to the June rate. The homebuilding pace represents a 20.9% drop from last year - in fact, it was the slowest rate since January of 1997.

The housing slump has existed for quite some time, but the latest figures indicate the crisis is actually worsening. The culprit appears to be the upsurge in mortgage defaults, especially in the subprime arena. More houses are flooding an already crowded market and, in turn, lenders are tightening their loan standards. As a result, it's getting tougher for prospective buyers to secure home loans.

Meanwhile, the chief economist for the National Association of Home Builders predicts home sales will stop their decline by the end of 2007. Consequently, home construction should become stable by the middle of 2008.

The housing crisis appears to be having a domino effect on other aspects of the economy. For instance, the home improvement chain known as Home Depot has been suffering losses - a direct result of the housing slump. Many industries are dependent on the home building business; therefore, troubles in the home construction industry affects a number of other businesses as well.

The Western states appear to be hardest-hit, although Midwestern states are suffering as well. So far, however, the housing crisis has not led to an all-out recession - although some analysts are not ruling out the possibility of a total economic downturn.

Homeowners who don't need to sell at the present time might be wise to wait until the spring of 2008 to put their houses on the market. That way, they may benefit from the expected housing upturn. Those who must sell now might want to be flexible in terms of their asking price; otherwise, their houses could sit on the market for a significant period of time.

Julie Ann Amos
August 22nd 2007

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