Building New Home
In May, there was a sharp decline in the number of new housing developments and permit applications due to the expiry of government tax relief for homebuyers. The news overshadows the positive news about production and inflation in wholesale markets. Failure to build new homes usually translates into a sharp rise in unemployment, as construction drives growth in various industries. From sawmill and sawmill manufacturers to paint and stucco producers, the effects of the slowdown in construction are being felt throughout the economy. Ironically, while slow construction is reducing the number of jobs, many cite unemployment as the main reason not to buy a new home.
The number of new homes and dwellings fell by ten per cent in May, to 592,000 seasonally adjusted. April’s figures were revised downwards to 660,000. Applications for new building permits, a barometer of future construction activity, fell by almost 6 per cent to 575,000 per year. This is the lowest figure of the year. Today, after the expiry of federal tax credits for home buyers, the number of builders is falling. The key evidence of this is the number of new single-family homes, which has fallen by 18 per cent, which is the largest monthly decrease since January 1991.
Some builders see opportunities in a struggling market by buying discounted land with the intention of developing it at a time when reconstruction is underway. Amazing news about housing has mixed with positive news from other sectors of the economy. Industrial production increased for the third month in a row and wholesale market inflation remains relatively low. U.S. factories, mines and utilities have grown.
Wholesale prices fell for the second month in a row, fuelled by a 7% fall in gas and heating oil prices. Core inflation, which does not include energy and food prices, also increased slightly.
Inflation is expected to remain contained also in June, mainly due to the fall in energy costs, especially for petrol. In May, food costs fell most since July last year, leading to an 18% drop in the cost of fresh vegetables, which at the beginning of the year in Florida were driven by frosts in Florida.
The fact that inflation remains under control means that the Federal Reserve is able to keep interest rates low, which will help stimulate the economy. Wall Street did not suffer from bad news from the housing sector, as Dow Jones climbed almost 20 points in the afternoon’s trade after the figures were published. The rate of construction of new homes, while an increase of 40% compared to April 2009, when it reached its lowest level, continues to slow down by 70% compared to the peak of the January 2006 housing boom.
Typically, after the recession, construction drives the recovery of the economy as a whole. This time, however, this will not happen. Developers are still burdened with huge resources of houses built during the boom, and competition is fierce and all closed and otherwise endangered properties in the closed market. As a result, new home sales, which accounted for about 15 per cent of the market in the years before the recession, now account for only about 7 per cent.
For more details about home renovations tips and ideas, visit Bush Builders home renovation in Essex.