New home starts and completions in July down from June; Permits are up

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This morning the US Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for July 2009 showing a slight increase in new home construction activity from June in the U.S.

For the Midwest region of the U.S. the report showed the following:

  • Building permits issued for single-family residences in July were at an annual rate of 77,000 which is a 5.5% increase over June, but still 18.9% below July 2008.
  • Housing starts for single-family residences in July were at an annual rate of 84,000 which is a 3.4% decrease from June and is 22.2% below July 2008.
  • Single-family homes completed in July were at a rate of 72,000 which is a drop of 13.3% from June and is 38.5% below July 2008.

Something to remember is all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for July 2009 versus July 2008. Another way to take a look at where things stand would simply be the year to date data, actual numbers and 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:

  • Through July 2009 there have been 40,900 permits issued for new homes compared with 61,200 this time last year for a decline of 33.1%.
  • Through July 2009 there have been 41,100 new homes started compared with 61,200 this time last year for a decline of 35.9%.
  • There have been 45,600 new homes completed through July 2009, compared with 79,300 this time last year for a decline of 42.5%

So, while the current trend, based upon seasonally adjusted numbers is upward, as you can see the new home market so far this year is way off from last year and last year was not good. Having said this, even though I feel for everyone affected by the downturn in construction, from the standpoint of the real estate market, I think this is necessary. We have an excessive inventory of new and existing homes on the market so there is no point adding to it substantially at this point. We need to let the sales numbers continue to increase, get the foreclosure rate out of high gear and let the inventory fall to a number that is more appropriate for the market demand. Then, and only then, do I think we want to see significant increases in new home construction.

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