Building-Permit Drop May Signal Renewed U.S. Housing Slump, Feldstein Says

[marmar]

Feldstein Says Falling Permits May Signal U.S. Housing Slump
By Steve Matthews and Margaret Brennan


May 18 (Bloomberg) -- A decline in U.S. homebuilding permits last month may indicate a renewed housing slump as demand weakens after the expiration of tax credits, Harvard University economics professor Martin Feldstein said.

Permits in April fell by the most since December 2008, according to Commerce Department figures released today in Washington. The report also showed housing starts rose to a 672,000 annual rate last month, exceeding the median forecast of economists surveyed by Bloomberg News and the highest level since October 2008.

“Permits are an indication of what is going to happen in the future,” Feldstein said in a Bloomberg Television interview. “With the first-time home-buyer credit behind us, we are not going to see the strength of housing demand we have in the last few months as people rushed to take advantage of that program.”

Feldstein, a former president of the National Bureau of Economic Research, said the potential for another decline in housing and less monetary stimulus from the Federal Reserve cast doubt on whether the U.S. has fully emerged from a recession that began in December 2007.

“I hope the recession is behind us,” he said, reiterating his warning from January that U.S. growth may falter this year because of waning stimulus from federal spending and tax incentives for purchases of homes and autos. “There is still uncertainty about the future pace of demand now that the government programs and the Fed programs aren’t there to support it.” .........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=ayfYrpivg5uA&pos=5

[MindandSoul]

1. Well, I'm not as "informed" as Bloomberg. . .but to me (and at least in my area)

the drop in new building permit represents the fact that with the lower price of existing housing, it is A LOT cheaper to purchase a "slightly used" home than to build a new one!

I live in a upper scale golf community, and many people who bought lots 2 to 5 years ago and are now ready to retire and . . .to build their "dream home" find it a LOT more economical (and faster) to purchase a used home in the same community. . .The difference can be as much as 30%. . .and the "used homes" are no more than 4 or 5 years old and were custom built!

In the last 3 months, at least 5 "lot owners" have decided to buy a resale rather than build on their lot!!!

[Dappleganger]

3. In order for home buyers to be able to get a cheaper used home in our area...

they'd have to purchase at least an 8 yr. old home at the very minimum to compete with the brand new homes. This is why it's so frustrating for home sellers where buyers are getting larger, new homes w/more features than used homes just a couple of years old. The inventory is HUGE in this area (NE FL) and with a high foreclosure/short-sale rate. This doesn't even take into consideration the unknown, but most likely very large shadow inventory of homes which are due to go into foreclosure but due to moratoriums haven't made it into the legal process yet.

[MindandSoul]

5. You may be right where you live. . .and you may even be right in the

"average" market!

However, I KNOW for a fact that you can purchase a custom built home on many golf courses in the South for about 25 to 30% LESS than the price of building a new custom home!. . .And the oldest of those home IS NOT 8 years old. . .while de "mean" age is 5 years old!

I.e., a 7 year old, custom build, 2900 square foot home with 3 beds, 3 bath, study, great room and sun room (all brick construction) is now on the market for $395,000 (it was first purchased from the builder 7 years ago for $325.000.
The same (in square footage and "fittings i.e., granite counter tops, tiled baths, etc. . .) built on YOUR lot (that is the price of the lot not included) would now require a MINIMUM of $425,000. These are just samples, but they are NOT isolated samples!

Do you need the location??? LOL!

[customerserviceguy]

2. The tax credit for homebuyers

expired, making home starts drop. It's like automakers offering cash incentives, they suck away future sales.

I'm a bit surprised that the tax credits were allowed to expire without renewal, my prediction is that they'll be back in six to nine months.

[MindandSoul]

6. Well, it seems that the automakers didn't suffer from the tax credit

and they are showing greater and greater profits. . .even many months after the end of the tax credit.

[customerserviceguy]

7. Quite true

but even an expensive auto is way cheaper than even a cheap house. I'm going to look at sales figures over the summer to see what happens.

It's my theory that Congress only extended the homebuyers' credit until the end of April because they were thinking that the summer housing market would pick up the slack from there, I guess we'll see if that is correct.

I don't think we've seen the bottom of the foreclosure market, and if we get a double-dip recession from all this stuff in Greece messing with the world economy, we'll definitely not be at the bottom in the real estate market. The tax credits were just CPR on the body, we'll see if it develops a pulse on its own or not.

[onethatcares]

4. well, duh,

there's a glut of homes on the market, just about everywhere. I would think that tight credit along with foreclosures, citizen review of development along with the tax credit expiring has something to do with that.

But what would I know? I'm just a used up old carpenter.:-(