Housing Takes Another Header
Mike Larson discusses how the housing industry is still declining. In this issue of Money and Markets, Mr. Larson takes a closer look at the reasons for the continual decline in the housing market.
Jupiter, FL (PRWEB) November 23, 2008 -- Mike Larson discusses how the housing industry is still declining. Mr. Larson takes a closer look at the reasons for the continual decline in the housing market.
Every month, the National Association of Home Builders (NAHB) surveys builders on the front lines of the industry. It asks them about sales, buyer traffic, and expectations about the future. And then it produces indices that sum up the results. The November numbers showed that:
| | - The overall index plunged to 9 in November from 14 in October. Not only is that a 36% decline in just one month, it also leaves the NAHB index at the lowest level ever (the data goes back to 1985).
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Among the sub-indices, the one that tracks current single family home sales dropped to 8 from 14, the one measuring expectations about future sales held steady at a record low of 19 and the one measuring prospective buyer traffic fell to 7 from 11.
| | - Regionally, builders didn't do well either. The Northeast index dropped to 11 from 16, the Midwest index slumped to 7 from 13, the South index fell to 11 from 16, and the West index plunged to 6 from 11. There was no sign of strength anywhere in the country.
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Builders are universally gloomy about the state of their business across all regions of the country. Readings on buyer traffic and current sales fell sharply, while expectations for future sales held at their record low from October. The credit crunch is part of the problem. Some consumers can't afford to buy homes because they can't access mortgage financing or because they have lost their jobs. Others don't want to purchase because they're worried home prices will fall further.
Most buyers don't pay cash to purchase homes. They take out mortgages. Naturally, the volume of applications for loans to buy homes can be used as a leading indicator of future home sales. And the news there points to shockingly bad future sales. The Mortgage Bankers Association's (MBA) weekly purchase loan index plunged 12.6% in the week of November 14. At 248.50, it's the lowest since the week of December 29, 2000.
The Census Bureau began tracking home construction and building permit issuance in 1960. According to the latest numbers, the housing industry is now building fewer American homes than it was back then.
| | - In October, housing starts were running at a seasonally adjusted annual rate of 791,000. That was down 4.5% from September, down 38% from the year-earlier reading, and down 65.2% from the January 2006 peak. This is the lowest level in recorded U.S. history.
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| | - Building permit issuance is a future indicator of construction activity. In the month of October, permitting activity plunged even more than housing starts, down 12.1% to 708,000 units at a seasonally adjusted annual rate. That's 40.1% off the year-ago level, down 68.7% from the September 2005 peak, and also the lowest level ever found.
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| | - Breaking it down by property type, single-family starts dropped 3.3% to 531,000. Multi-family starts dropped 6.8% to 260,000. Single-family permitting activity dropped 14.5% to 460,000, while multi-family permitting dropped 7.1% to 248,000.
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"Lower construction activity is necessary to bring supply back in line with demand. And builders have made some progress in reducing new home inventory for sale. But with unemployment on the rise, mortgage credit harder to get, and the broad economy slowing, housing demand is sliding. That should necessitate an even lower level of starts, hard to imagine given that the U.S. is already seeing the lowest level of activity in recorded U.S. history," Larson states.
To read this issue online, please visit:
http://www.moneyandmarkets.com/sp-500-crashes-through-bear-market-low-housing-heads-south-6-28195
About Mike Larson and Money and Markets
Mike Larson joined the company in 2001, and has more than 10 years of experience researching and writing about personal finance, investing, and the housing and mortgage industry. In 2003, Mr. Larson was named associate editor of the company's monthly Safe Money Report. In this role, he is responsible for writing and editing as well as analyzing trading opportunities for clients. Mr. Larson is also a regular contributor to the company's daily e-letter, Money and Markets.
Before joining Weiss Research, Mr. Larson was a personal finance reporter for Bankrate.com, where he wrote extensively on mortgage lending, banking, residential real estate, and Federal Reserve Board policy. His responsibilities included analyzing economic data and interest rate trends for a weekly column and developing rate forecasts for a regular index feature. Previously, Mr. Larson held positions at Bloomberg News and the Boston Herald.
Recognized as an interest rate and mortgage market expert, Mr. Larson's views have been quoted in the Washington Post, Chicago Tribune, Dow Jones Newswires, Reuters, Sun-Sentinel and the Palm Beach Post. He has also appeared as an investment expert to discuss the housing market on CNBC, CNN, and Bloomberg Television. His writing has been acknowledged by both the National Association of Real Estate Editors and the Massachusetts Press Association.
Among the first analysts to call the housing slide, Mr. Larson's new policy paper, "How Federal Regulators, Lenders and Wall Street Created America's Housing Crisis: Nine Proposals for a Long-Term Recovery" has received broad media coverage following its July 2007 submission to the Federal Reserve and FDIC. Mr. Larson holds B.A. and B.S. degrees from Boston University.
Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.
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