New Home Construction

May 17th, 2008 @ 3:17 PM by Alden Smith

We see an upturn in new home construction for the month of April, the first increase in some time.  Reports from the Commerce Department Friday give the figure of housing construction rising by 8.2 percent in April to a seasonally adjusted annual rate of 1.03 million units.  The painful housing slump is far from over, though, as a record flood of foreclosures continues to plague the nation.  One reason analysts are seeing in the rise in housing is the need for apartments – a sign that people are losing homes and needing a place to live.  This is hardly a resurrection of the American dream.  Apartment construction rose by 36 percent, but the single family home dropped 1.7 percent, the 12th consecutive monthly decline.  This pushes single-family activity down to a 16-year low.

 

Len Blum, managing director of investment bank Westwood Capital, looks for this slum to last for at least another year.  He blames it on the instability ion the lending market, with banks not knowing really which way to turn when it comes to lending standards and people with the overly cautious reluctance to commit.  In an economy where everything essential to exist is rising at inappropriate rates, this is understandable.  People are struggling just to eat right now, and it does not seem that this will change any time soon.  To back that up, I refer to a University of Michigan/ Reuters survey that states consumer confidence is at an all time low, with figures at a 28-year low of 59.5 in a preliminary reading for May, down from 62.6 in April. 

 

Currently there is a huge back-load of homes to be sold, and until builders can unload them, there is not a great deal of sense in building anew.  Although Treasury Secretary Henry Paulson said on Friday that things in the market are a bit calmer than in March, it is hard for me to believe that the economic stimulus package is going to make a great deal of difference at a nationwide economy level.  You can just about bet that people are going to use this small windfall to bail themselves out of financial mire, sock a little of it away, and maybe have a nice steak dinner.  Outside of any real boost to the economy, I see people using it for much needed automobile repairs, home repairs, and maybe catching up that late house payment.  Who, I wonder, benefits from this?