Housing Starts and Permits Are Down, MBA Outlook Is Gloomy Until 2009
The slumping housing market continues with a decline in both housing starts and permits. It looks like the builders are really hitting the brakes (finally). From CCMoney.com:
The pace of housing starts plunged 10 percent in one month to an annual level of 1.19 million, compared to a 1.33 million rate in August.
Housing starts - down nearly 31 percent from year-ago levels are now at their weakest level in 14 years.
Housing permits, which are seen as a sign of builders' confidence in the market, slumped 7 percent to an annual rate of 1.23 million from 1.32 million in August. Economists had looked for permits to slow to a 1.3 million pace.
The news on housing permits was equally bleak: The figures represent the lowest level of permits in more than 12 years, and the latest drop left permits down about 26 percent from a year earlier.
The weak level of building suggests that housing is in an even deeper slowdown than originally expected, as the collapse in the mortgage market, falling home prices and an equally weak market for existing homes has dried up the supply of potential buyers.
Beyond the impact on home sales and prices, the sharp drop in building could also prove to be a major drag on the economy because it depresses employment levels and overall economic activity.
According to Bill Hampel, chief economist for the Credit Union National Association, the housing problems raise to 40 percent the chances that the economy could topple into recession.
A separate Census Bureau report showed there were 180,000 completed new homes for sale at the end of August, just barely below the record 182,000 level seen in May. Further,the National Association of Realtors reports a record 4.6 million existing homes on the market at the end of August.
The second article, also from CNNMoney.com concerns sales declines and housing related layoffs.
For those in the real estate industry and for those looking to buy or sell a home, it could take until 2009 to catch a break. What happens if there is an economic downturn?
That's the forecast from Doug Duncan, chief economist for the Mortgage Bankers Association (MBA) . . . . Duncan expects national median home prices to fall between 2 percent and 4 percent both this year and next. Prices will be held back by an oversupply of homes for sale, an increase in foreclosures and continued uncertainty among mortgage investors.
For this year, Duncan is predicting a 22 percent drop in new home sales and a 12 percent drop in existing home sales, followed by a 10 percent drop in each next year. As home sales fall, Duncan also expects a drop of 15 percent in mortgage loan originations to $1.18 trillion this year, plus another 18 percent drop in 2008 to $1 trillion. . . . .
. . . . The continued weakness will push those in the mortgage industry to further cut their workforce. On top of the 60,000 to 70,000 mortgage-related layoffs that have already occurred, Duncan expects to see another 30,000 to 40,000 by early 2008.