Housing Continues To Plunge

New Home Construction Hits Lowest Level In A Decade, Existing Home Sales Fall,Too

(CBS/AP)  Housing construction plunged to the lowest level in nearly a decade last month as the housing industry continued to struggle with a severe slowdown.

Meanwhile, wholesale prices dropped by 0.6 percent in January, the biggest decline in three months, providing fresh evidence that inflation pressures are easing.

Across the country, the median home price is now $219,000, down 2.7 percent from a year ago, reports CBS News correspondent Anthony Mason. Among the worst-hit regions: the Sarasota area of Florida, which is down 18 percent, Springfield, Ill., down 10.4 percent, Reno, Nev., down 8.9 percent, and San Diego, down 6.5 percent.

Construction of new homes and apartments plunged by 14.3 percent in January, pushing total activity down to a seasonally adjusted annual rate of 1.408 million units, the Commerce Department reported Friday.

The decline pushed activity to the slowest pace since August 1997, with construction in January 37.8 percent below the pace of a year ago. The steep decline last month followed two months of construction increases which had raised hopes that perhaps the worst of the housing slump was over.

The weather was blamed for part of the setback. November and December had been unusually mild while more normal winter weather returned to much of the country in January, depressing building activity.

However, economists said the depth of the decline showed that housing was still facing major problems after a five-year boom that ended last year with falling construction and declining sales of both new and existing homes.

David Seiders, chief economist of the National Association of Home Builders, said that builders were slashing sales prices and offering other incentives such as upgraded kitchens and free decks to move homes.

"The use of incentives has not abated," he said. "The percentage of builders trimming prices has been increasing and the use of non-price incentives is expanding as well."

The report showed that applications for new building permits, considered a good barometer of future activity, fell in January for the 11th month out of the past 12, dropping by 2.8 percent to an annual rate of 1.568 million units.

By region, housing construction was down 28.5 percent in the West, 15.2 percent in the Midwest and 11.8 percent in the South. Construction starts were up only in the Northeast, a gain of 8.9 percent.

Analysts said the weakness in January construction meant that housing, which shaved more than a percentage point off economic growth in the last half of 2006, will continue to be a drag going into the new year.

On Thursday, the National Association of Realtors said that sales of existing homes fell in 40 states in the fourth quarter of 2006 and home prices dropped in 49 percent of the metropolitan areas surveyed, the widest price decline in the history of the Realtors' survey.

Etienne Kusmierek is feeling the slump in Miami, reports CBS News correspondent Kelly Cobiella. A year or two ago, the ocean view alone would have sold his condominium. But his apartment has been on the market for five months. He dropped his asking price by $50,000 and has even offered to pay the first year's maintenance fees, a $12,000 incentive.

"The market has changed, and we have to adapt to it," says Kusmierek.

Mark Zandi, chief economist at Moody's Economy.com, said he looked for prices to continue falling.

"This market will not find a bottom until this inventory is worked off and the only way for that to occur is through further price declines," he said.

In the inflation report, the Labor Department said that the 0.6 percent drop in its Producer Price Index was the biggest one-month decline since a 1.8 percent fall in October.

The decline last month occurred because of a 4.6 percent plunge in energy costs, reflecting lower prices for gasoline, natural gas and home heating oil.

But even outside of the volatile energy and food categories, inflation pressures were well contained, rising by a modest 0.2 percent as the price of new cars and trucks fell as automakers struggle with huge inventories of unsold cars.

Federal Reserve Chairman Ben Bernanke told Congress this week that the central bank believed inflation pressures would gradually recede over the coming two years as the economy expands at a moderate pace.

Many private economists believe the central bank is close to achieving its hoped-for soft landing in which growth slows enough to keep inflation contained without pushing the country into a recession.

[bluestardad]

********** we are still building homes and appartments in the Midwest and people cannot even find work!

[terrapin78]

And this is the great economy that Dumbya touts.

[fascistusa]

We are in for the GREAT DEPRESSION 2.

Last week the PROPAGANDA NEWS was telling us the Housing Market was getting better. Wow. Things change in a week.

I WOULD NOT SIGN A CONTRACT OR BUY ANYTHING EXPENSIVE RIGHT NOW. Your Government WILL NOT protect you. We have NO RIGHTS. Business can do ANYTHING THEY WANT. You are screwed.

[feelfree1]

jh6379,

Re: "So should I wait a bit longer to buy my first home or would it be best to get it now?"

I would recommend waiting until at least later this year. I think that you can expect prices to continue to droop, maybe dramatically, and interest rates are likely to drop in an effort to prop up the market.

Just my opinion.

[sharncedar]

you know what - I was just looking around with a fresh open mind and we are doing great, the country is doing great, and yet we always feel doom is just around the corner. Is it the American character, is it human nature, I don't know what. It is easier to believe a sad story, maybe admitting that this is a fine economy (heck everybody is getting fed, that's remarkable by historical standards) puts too much pressure on us to live fine lives.

Things are looking good though -what a gorgeous, beautiful country we live in, what a gorgeous beautiful day this is.

[bildooreilly]

I agree with you somewhat Sharn, even though the present economy isn't so great I don't believe, only for those who are already rich and getting richer off the stock market or something. However, a resourceful driven person can still luck out and make some big bucks at a zillion different things, basically whatever they set their mind to. People however have become lazy and shiftless and want to simply be slaves for some big corporation who they'll always complain about but don't have the drive or even the coginitive thinking skills to create their own business. Then if you don't work a "real" job like they do which is basically a paid slave, they'll claim you don't work for a living etc. while you're bringing in more bucks than they are. It's amazing..

[fox77_99]

The Bush Administration with its neocons and theocrats has sent our country in a downward spiral.Housing is just one of the many failures of this Presidency which is the worst administration in the history of the United States. We must get this administration out of office and elect someone capable like Al Gore or Wes Clark as soon as possible.

[selenite1]

To Fox77_99 :

I am in complete agreement.

This administration is criminally incompetent.

[standlee5]

New Home Construction Hits Lowest Level In A Decade, Existing Home Sales Fall,Too


that's not really saying much considering it's been a decade long boom

[rhs648]

A Little historical perspective. My first mortgage was 9 1/2% and that was normal. It took nineteen years for my home to double. My current home has more than doubled in just six years. We had the cold war with the Russians threatening to bury us. Around 55,000 American soldiers died in Vietnam. Raises were around 2 1/2% for many of us when inflation, under President Carter, was in excess of 21%. Open heart surgery did not exist. A couple of times, there were long gas lines and limitations on how much fuel we could purchase for extended periods of time. Video recorders, dvd recorders, HD TV, and computers did not exist. Do we have problems? Yes! However, most Americans have it better today than in any other period in history.

[candojj1]

The study quoted a Federal Reserve report that found an estimated 35 percent of ARM borrowers did not understand the maximum amount their rate could rise at one time or even how to calculate what the maximum rate would be. Another survey by Public Opinion Strategies found that lower-income people did not think that traditional mortgages were an option for them and we also less informed about reset shock and the debt risks.

Borrowers with prepayment penalties and minimum equity may be unable to refinance out of a loan that, once it readjusts, they can no longer afford. The study quotes research by First American Real Estate Solutions that up to 1 million households are in danger of losing their homes through foreclosure aver the next five years because they will not be able to afford new payment levels and will owe more on their homes than they can recoup through a sale or refinance. The ACORN report indicates that the impact of rate reset shock may be concentrated in certain metropolitan areas, neighborhoods, and among certain demographic groups. This might possibly magnify the impact as forced sales and foreclosures flood the market and further drive down prices.

For full article see:

http://www.mortgagenewsdaily.com/8242006_Rate_Shock.asp

[cbgb31]

Housing Continues To Plunge


... and it's still unafordable.

[pepperwood2]

I would be reluctant to build now, if I were going too. The ideal time would of been when the mortgage rates were much lower 1-2.5% - now I guess their 5.5 -7%.

With the economy picking up over the last several years interest rates have increased. The tax breaks & low interest/mortgage encouraged more housing starts.

It did set quite a few records, so I would think this is to be expected. Not really a story of any consequence.

[down-ndirty]

"Raises were around 2 1/2% for many of us when inflation, under President Carter, was in excess of 21%." Posted by rhs648

I agree with the first part of your post. I bought a house in '78 and the interest rate jumped from 7 to 10% while in escrow.

However, if you go back and review economic history of the early '70s, you'll remember that OPEC reduced oil supplies in '73, which caused a chain reaction. Oil crisis--oil prices went up--inflation--slowed growth.

The second energy crisis occurred in 1979 after the Iranian revolution. Although oil production was down only 4%, it was the panic that drove the price much higher than normal. Carter countered the high price with price controls. Something you haven't seen with our 'oil' president.

You can hardly blame the Iranian revolution on Carter; it was Eisenhower who put the hated tyrant Shah in power.

[down-ndirty]

"So should I wait a bit longer to buy my first home or would it be best to get it now?" Posted by jh6379

We agonized over that when, in escrow our rate jumped from 7 to 10%. We continued with the purchase in spite of a large increase in the payment. We're not sorry.

Had we not bought then, it would have been a very long time before we would have had another chance. The average interest rate for the last 150 years is about 6%. Out of the last 30 years the rate hasn't been below 6% for very many of those years.

It's a gamble, but it's a very minor gamble because you either invest in your own home or you pay rent and invest in someone else's property.

Here in SoCal, if one can afford to buy, the payments will be less than rent on an apartment after about 5 years.

And, with the housing slump, it's a buyer's market, regardless of the slightly elevated rates.

[down-ndirty]

Another thing to consider is that about 80% of your house payment is tax deductible. The 80% represents the deductible interest portion of the payment when you start out. Property taxes are also deductible.

[bluestardad]

Here you go Sphincter face qualtify this!

http://www.carlosmencia.com/content/videos.php?id=66

[newsjeff-2009]

Okay let me get this straight, the housing market is continuing to fall into a slump, Chrysler is laying off more than 13,000 workers, I read on another news network about Hershey Foods in Pennsylvania is possibly moving hundreds of jobs to Mexico,Ford has closed plants and cuts several thousand jobs,etc., but according to the Bush Administration and the GOP party "The economy in the U.S. is strong and prosperous." Seems to me like we have more students and more adults going to school and learning new jobs skills, and college degrees,high-tech jobs skills,etc, but at the same time more and more companies are shipping jobs out of the country and overseas. I guess that is why there is a small number of people besides myself that do not believe that our economy is all strong and rosey like the Bush Administration says it is!!

[sharncedar]

"Another thing to consider is that about 80% of your house payment is tax deductible."

Which means you are getting a lower effective interest rate, not that you are nto paying interest. For example, you can consider your actual interest rate to be 5% instead of 7% if you are in the 22% tx bracket, or something like that. You don't actually save money, you just get hosed at a lower rate.

Our government is subsidizing the profits of the mortgage lending industry, meaning those who work at legitimate jobs are paying extra taxes so that banks can sell more mortgages. But, you the sheeple love it just fine, don't you baaa baa baaa

And you pretend they are doing you a favor. In fact, if you borrow money on a 30-year mortgage to buy a house, you will pay about 2.6 times the actual cost of the house over 30 years. Oh, but you save a few pennies on taxes, baaaa baaa baaa.

If you had any discipline, saved your money first, you could own 3 houses in 30 years, plus all of the rental income or interest revenue. But no, baaa baaa baaa have to do what the banks tell you, walk to the slaughter