US home building plunges 11pc amid growing jobs crisis and tax credit cuts
A home is seen as it is under construction on November 18 in Miami. Photo: Getty Images
Thursday November 19 2009
US builders unexpectedly broke ground on fewer US houses in October as the sales outlook darkened with the looming expiration of a government tax credit and mounting joblessness.
The 11pc plunge in starts to an annual rate of 529,000, the lowest level since April, followed a 592,000 pace the prior month, Commerce Department figures showed yesterday in Washington. Building permits, a sign of future construction, also decreased.
The market may have seized up as builders waited to see if the administration would extend a first-time buyer incentive that helped lift sales. President Barack Obama signed legislation this month to include some current owners, which may give companies such as Toll Brothers Inc reason to gain optimism even as the highest unemployment rate in 26 years shakes confidence.
"The numbers are shocking," said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, who forecast starts would drop. The decline "represents a payback for the tax credit, which induced builders to build earlier".
Mortgage applications for purchases in the US fell last week to the lowest level in 12 years, indicating the housing market is facing a hurdle with unemployment at a 26-year high.
The Mortgage Bankers Association's index of applications to buy a home dropped 4.7pc in the week ended November 13 to 210.6, the lowest level since November 1997. The total applications index fell 2.5pc to 611.7 from 627.5.
Mr Obama earlier this month signed legislation extending the first-time homebuyers tax credit through April, while the Federal Reserve's programme to purchase housing debt is valid through March.
The stimulus is aimed at spurring demand that's threatened by mounting unemployment.
"Now that the Fed's programme has been extended and the government has extended its programme, I would expect things to improve," Christopher Low, chief economist at FTN Financial in New York, said before the report. "If you don't see an improvement within the next couple of weeks, that would indicate a problem."
Obama on November 6 signed into law the first major expansion of February's stimulus plan, pushing the deadline for first-time buyers to close on a transaction out to April 30 from November 30.
The credit is worth up to $8,000. The new measure also added buyers who have owned a home for at least five years, making them eligible for a credit of up to $6,500.
Uncertainty over whether the credit would be extended weighed on homebuilder confidence in November.
The National Association of Home Builders/Wells Fargo index of builder confidence held at 17 in November, the group said yesterday.
"Home builders and buyers were in something of a holding pattern in early November," David Crowe, the NAHB's chief economist, said in a statement.
He also said builders are having problems getting credit.
(Bloomberg)
Irish Independent
