New Home Construction Declines in April; No Recovery in Site for Builders

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued their report on New Residential Construction for April 2011 showing a 1.8 percent decrease in single-family home building permits from the month before, and a 5.1 percent decrease in new home starts compared to the month before.

The report shows the following new home construction activity for April 2011:

  • Building permits issued for single-family residences were at an annual rate of 385,000 homes which is 1.8 percent below the prior month and a decrease of 18.6 percent from a year before.
  • Housing starts for single-family residences were at an annual rate of 394,000 which is an decrease of 5.1 percent from the prior month and a decrease of 30.4 percent from a year before.
  • Homes completed were at a rate of 420,000 homes, an increase of 14.4 percent from the prior month and a decrease of 23.8 percent from a year before.

As I say every month, we need to remember that all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for the current month versus the a year before. Another way I like to look at where things stand is to simply look at the year to date data; actual numbers, not seasonally adjusted, compared to last years ytd numbers at this same time. I think this may give a little better comparison so those numbers are below:

  • For 2011 there have been 126,400 permits issued for new homes compared with 162,500 this time year for a decrease of 22.2 percent.
  • For 2011 there have been 125,500 new homes started compared with 166,600 this time last year for a decrease of 24.7 percent.
  • For 2011 there have been 122,000 new homes completed compared with 141,200 this time last year for a decrease of 13.6 percent.

Let’s do one of my favorite things and look at the raw numbers and not seasonally-adjusted numbers to compare construction activity to sales:

  • In the 12 month period through March 2011 (the most recent period sales data is available for) there were 306,000 new homes sold and there were 488,100 new homes completed, outpacing sales by 59.5 percent.

Not to be gloom and doom, but I think reality is that it is going to be quite a while, years in fact, before we see new home construction activity back up to historic normal levels. I say this because the supply is still outpacing demand, and demand is not going to pick up significantly until the glut of foreclosures and short sales that are bringing prices down, fall to levels that do not impact home prices in the manner they are today.

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