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Housing construction drops

Housing construction drops

AP
December 18, 2007

WASHINGTON – Housing construction fell in November with single-family activity dropping to the lowest level in more than 16 years. Analysts said the recession in housing showed no signs of a turnaround.

The Commerce Department reported Tuesday that construction of new homes and apartments dropped by 3.7 percent last month to a seasonally adjusted annual rate of 1.187 million units.

Construction of single-family homes fell by 5.5 percent to an annual rate of 829,000 units. It was the eighth consecutive drop in single-family starts, pushing activity in this area to the lowest level since April 1991. Apartment building rose last month by 4.4 percent to an annual rate of 332,000 units.

In an ominous sign for future activity, the government reported that applications for building permits fell for a sixth straight month, dropping by 1.5 percent to a seasonally adjusted annual rate of 1.15 million units, the slowest pace for building permits since June 1993.

On Wall Street, investors were buffeted by the continued bad news on housing and an encouraging move by the European Central Bank to inject the equivalent of $500 billion into the European banking system to combat the global credit crunch that has been triggered by the meltdown in subprime mortgages in the United States. After a rollercoaster day, the Dow Jones industrial average finished up 65.27 points at 13,323.47.

The overall construction decline left home building 24.2 percent below the level of activity a year ago. After five straight years of record sales and soaring prices, housing has been in a serious downturn for two years.

Analysts expect the weakness to intensify in coming months, possibly becoming enough of a drag to push the country into a full-blown recession.

“The housing recession continues to grind away,” said Brian Bethune, an economist at Global Insight. “The housing market is now navigating through perfect storm conditions.” He said a downward spiral in sales is being exacerbated by the severe credit crunch and rising mortgage foreclosures which are dumping more homes on an already glutted market.

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U.S. Housing Crash Deepens in 2008 After Record Drop

Bloomberg
December 14, 2007

For U.S. homeowners, builders, bankers and realtors, the crash of 2007 will only get worse in 2008.

Everyone from mortgage-finance company Fannie Mae to Lehman Brothers Holdings Inc. expects declines next year. Existing home sales will drop 12 percent and existing home prices will fall 4.5 percent, Washington-based Fannie Mae says. Lehman analysts estimate almost 1 million mortgage loans will default in 2008, up from about 300,000 this year.

“We’re only halfway through the housing shock,” said Ethan Harris, chief U.S. economist at New York-based Lehman, the fourth- biggest U.S. securities firm by market value. “It’s just a matter of time before the weakness spreads to the rest of the economy.”

The housing market collapse has been anything but the “soft landing” that Federal Reserve Bank of San Francisco President Janet Yellen and David Lereah, former chief economist at the National Association of Realtors in Chicago, predicted for real estate at the start of 2007.

Median home prices declined in the U.S. this year, the first annual drop since the Great Depression, according to forecasts from the National Association of Realtors.

“I’m not going to sit here and tell you it’s going to turn real strong next year,” said Jim Gillespie, chief executive officer of Coldwell Banker Real Estate LLC, the largest U.S. residential brokerage, according to Franchise Times. “It’s not going to turn real strong next year.” Gillespie said he doesn’t make housing market forecasts.

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