Home Starts Up, But 2009 Is a Disaster For New Home Construction
The Census Bureau announced that November housing starts were up 8.9 percent over October to a seasonally adjusted rate of 574,000.
Good news? Not really. That number is down more than 12 percent from November, 2008.
Overall, the numbers are a lot better than earlier in the year. According to Amy Crews Cutts, deputy chief economist of Freddie Mac, the first quarter of the year (January through March) reflected "the deepening of the financial crisis with the conservatorship of Fannie Mae and Freddie Mac and the failure of Lehman in September (2008). That sent a big shock wave through the financial system and nearly all lending stopped (lending that wasn't supported by GSEs or Ginnie Mae anyway). ADC (acquisition, development and construction) loans were dead on the spot and still remain very, very tight today (as does nearly all commercial lending)."
Crews Cutts said that the lack of lending led to the massive decline in construction at the end of 2008 and into the beginning of 2009. And, she believes that the $8,000 first time home buyer tax credit and $6,500 trade-up buyer tax credit have contributed to what she calls "frontloading of purchases, as people who wanted to buy but planned on doing so later got in under the original window" (before the tax credits expired.
The new housing numbers bumped up in July and in September, but took dip in October, probably because of the expiration of the tax credit under the original legislation, Crews Cutts believes.
Fast foward to next May or June, after the current tax credits expire and it could be a replay of October all over again for home builders.
Looking at the big picture, here's how new construction unfolded in 2009:
- January through March: approximately 358,000 single family units started.
- September through November: 487,000 units single family units started.
"To put the housing starts numbers into perspective, we could double the production from 2009 (where it looks like we'll come in around 440,000 units for single family homes for the year) and we would not equal the starts from 1946, the furthest back we've traced the data," Crews Cutts explained. "In that year, the U.S. started on 940,000 single-family units. In 1982, the worst year recorded before now, we started 660,000 homes, or 50 percent more than we did this year."
Want to feel even worse? In 1982, mortgage interest rates were above 18 percent for a 30-year fixed rate loan.
Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask. She blogs about money and real estate at ThinkGlink.com.