Home Construction Rises

[Aug 2, 2007.]

The troubled housing industry received some positive news recently with a report that new home construction increased 2.3% in June. However, enthusiasm was dampened by the fact that the new construction rate in May was revised downward.

As a result, the U.S. housing market remains in the midst of tough times.

According to figures released by the U.S. Commerce Department, housing starts in June increased to a seasonally-adjusted rate of 1.467 million houses. Unfortunately, the rate is a dismal 19.4% lower than last year's rate. The decline in the rate demonstrates that the American housing market is suffering through a serious downturn.

Meanwhile, the original May home building rate was 1.474 million houses—a figure that has been revised to 1.434 million. The decline in demand for new homes mirrors a decline in demand for existing homes.

Still, according to many realtors, the new housing market is faring better than the market for existing homes. That appears to be because homebuilders are offering prospective homebuyers some fabulous "goodies" for purchasing now.

For instance, in Washington, builders have been throwing parties for homebuyers—complete with drinks and celebrity guests. In addition, builders are offering homebuyers a break on transaction costs in an attempt to sweeten deals.

Meanwhile, according to government figures, housing permits dropped 7.5% to an annual rate of 1.406 million units in June. Forecasters had expected a rate of 1.490 million last month.

Observers are increasingly pessimistic about a rebound in the housing market anytime soon. In fact, some experts are predicting that the market will not improve in 2007—and they are only cautiously optimistic about 2008. Of course, there are those who say that negative media reports about the housing market have worsened the situation, leading to a lack of consumer confidence. When the housing market will actually recover remains anyone's guess.

Julie Ann Amos
August 2nd 2007

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