Home construction sinks 5% in June, lowest level in 10 months

posted at 12:55 pm on July 20, 2010 by Ed Morrissey

Yesterday the National Association of Home Builders reported that confidence levels had hit 16-month lows.   Today, we find out why.  Home construction dropped 5% in June from a revised-downward May to hit a level not seen since October of last year:

Home construction plunged last month to the lowest level since October as the economy remained weak and demand for housing plummeted.

But driving the June decline was a more than 20 percent drop in condominium and apartment construction, which makes up a small but volatile portion of the housing market. Construction of single-family homes, the largest part of the market, was down slightly. It dropped 0.7 percent.

Overall, construction of new homes and apartments in June fell 5 percent from a month earlier to a seasonally adjusted annual rate of 549,000, the Commerce Department said Tuesday. May’s figure was revised downward to 578,000.

One bright area of the report was an increase in building permit applications, which is a sign of future activity. They rose 2.1 percent from a month earlier to an annual rate of 586,000, however this was also driven by apartment construction.

What is driving the decline?  Demand dropped dramatically after the end of the homebuyer tax credit in April, just as it did after the expiration of the first tax credit last November.  Not too surprisingly, the new-home building industry finds itself basically in the position before the first tax credit.  The bubble has deflated — again.

Two forces have capped demand: joblessness and foreclosures, and the latter is in large part a secondary issue from joblessness.  People without jobs, or people who do not feel secure in their jobs, do not go out and buy new homes.  For those few who are in the market, the glut of inventory in new homes (around nine months’ worth of sales) and the large inventory in foreclosure bargains mean that new homes don’t need to be built — and aren’t.

We won’t solve the housing crisis until we solve the jobs crisis, and the gimmicky stimuli have wasted money that could have otherwise gone into growth-producing investments.  In order to get that kind of growth, we need to dump Obamanomics — which Mort Zuckerman rightly called “our economic Katrina” — and get back to the policies that worked in the past — lower taxes, streamlined regulation, and the retreat of government from the private sector.

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and get back to the policies that worked in the past — lower taxes, streamlined regulation, and the retreat of government from the private sector.

Great, so we’ll have to wait at least until Jan. 20, 2013.

rbj on July 20, 2010 at 12:58 PM

We have too many unoccupied homes now. Why do we need more?

Didn’t the developers, mortgage brokers and banks fully gorge at the feedbag via middle class and lower class debt securities?

Enough.

Fill what we’ve got before more beautiful farmland is swollowed up to build more McMansions.

rickyricardo on July 20, 2010 at 12:59 PM

In order to get that kind of growth, we need to dump Obamanomics — which Mort Zuckerman rightly called “our economic Katrina” — and get back to the policies that worked in the past — lower taxes, streamlined regulation, and the retreat of government from the private sector.

None of which will happen under Obama and Dem control of the government.

Guardian on July 20, 2010 at 12:59 PM

What is driving the decline?

Recovery Summer, of course. Construction folks are still “recovering.”
/too easy

ted c on July 20, 2010 at 1:03 PM

Socialism in action …

tarpon on July 20, 2010 at 1:08 PM

Socialism in action …
tarpon on July 20, 2010 at 1:08 PM

On a National Level…

National Socialism in action …

Chip on July 20, 2010 at 1:10 PM

Calm… calm myself? How can I be calm when Obama’s stupidity, STUPIDITY! is losing the economy!

J_Crater on July 20, 2010 at 1:11 PM

Argh. We’ll start recovering from this crap right before the tax cuts are rescinded in January. Then we’ll get to recover from that.
 
If we’d been allowed to find the floor of this mess back when the bailouts and “stimulus” payouts package was passed our economy would be going uphill again.

rogerb on July 20, 2010 at 1:13 PM

and get back to the policies that worked in the past — lower taxes, streamlined regulation, and the retreat of government from the private sector.

I always keep asking this and never get a great response. How do all of these government and union wages, pensions, benefits, etc get rolled back without ending up with a situation like Greece?

Canadian Infidel on July 20, 2010 at 1:15 PM

Hm. How unexpected.

Greek Fire on July 20, 2010 at 1:17 PM

How can home construction do anything but decline? I find this story a big fat DUH!
There is not going to be recovery in home construction for a very long time.
And rogerb is right on. If this bogus stimulus crap is not stopped, it will be even longer.

ORconservative on July 20, 2010 at 1:18 PM

Homes were over built with easy credit/no credit loans. Now, this is the correction that is needed. Home prices will decrease and people with assets, jobs, and credit will purchase homes. Starting the cycle over again. No government help, just let it work itself out.

Oil Can on July 20, 2010 at 1:21 PM

…and yet Obama in all his brilliance continues to worry about anything BUT jobs. Oh, and let’s keep shoveling more money to the unemployed instead of fostering an environment that will create jobs. Let’s make it a cool 520 weeks worth of checks just to be sure that no one is caught in between jobs.

search4truth on July 20, 2010 at 1:22 PM

Actually if we didn’t have Obama creating havoc in the economy, 5% interest would cause a red hot housing market.

seven on July 20, 2010 at 1:25 PM

When no one can afford to live in houses due to no jobs.. are these house going to be free then?

Where is my chicken and my pot?

upinak on July 20, 2010 at 1:25 PM

EXPECTEDLY!!!

MaiDee on July 20, 2010 at 1:34 PM

There are 7-8 million empty homes out there. There is no need to build any additional homes for at least a year.

angryed on July 20, 2010 at 1:46 PM

OOOTTTT!

“I’m going to vote for her because I believe the last election had consequences,” Graham said in announcing his support for Kagan.

This guy and his sidekick in AZ need to have consequences in their next election else McCain and Grahmanasty will help Pinnochio pass Amnasty, cap and Tax, and go along with whatever Lib the Lyin Pinnochio nominates. Juan says this is his last run well AZ retire him now or we will all pay for your folly!

dhunter on July 20, 2010 at 1:58 PM

The good news is many illegals will be out of work…maybe, just maybe they will head home

Ditkaca on July 20, 2010 at 2:02 PM

“I’m going to vote for her because I believe the last election had consequences,” Graham said in announcing his support for Kagan.

Graham is piece of filth.

Can anyone ever imagine a Democrat using this as reason for their vote?

This is precisely why the Republicans are a loser party; unable to advance a conservative agenda regardless of how much power they have in DC.

Either this crap is going to stop, or there is no sense in having elections anymore.

Start electing ideologues who will fight like hell now or we are wasting our time.

rickyricardo on July 20, 2010 at 2:05 PM

get back to the policies that worked in the past — lower taxes, streamlined regulation, and the retreat of government from the private sector.

Ain’t gonna happen with a socialist president. He’s soooo smart that he, and he alone WILL GET IT RIGHT THIS TIME.

In Barry’s world, Cuba, North Korea, Venezuela, etc are all SUCCESS stories.

GarandFan on July 20, 2010 at 2:57 PM

Isn’t this a given?

Of course, nobody in their right mind would build right now. Look at the unsold housing out there and the backlog of houses that will eventually be foreclosed properties.

AnninCA on July 20, 2010 at 2:58 PM

When no one can afford to live in houses due to no jobs.. are these house going to be free then?

Where is my chicken and my pot?

upinak on July 20, 2010 at 1:25 PM

I think the prices will, indeed, drop further. No money, no high prices, either.

AnninCA on July 20, 2010 at 2:59 PM

I’m not really sure this administration is at all interested in “solving” the housing, Gulf spill or joblessness crisis. After all, if you truly believe that you should “never let a crisis go to waste” wouldn’t you also believe you should never let a crisis end? As once it does you just can never tell when another will come along. The Obama administration needs joblessness in order to pressure Congress into spending ever more money. It needs joblessness in order to come to the rescue of the unemployed with “shovel ready” jobs.

So even if it believed lower taxes would result in more jobs, so what? What’s in it for them? They want solutions that increase the power and reach of the Federal government and lets them play Santa Claus all year around. A low unemployment rate just means fewer people depending on them for help. They might not complain openly about a slowly shrinking unemployment rate as it is useful in calming the public, but they certainly don’t want unemployment to disappear.

Fred 2 on July 20, 2010 at 5:29 PM

When no one can afford to live in houses due to no jobs.. are these house going to be free then?

upinak on July 20, 2010 at 1:25 PM

Officially, I’m guessing that totally free houses will be limited to welfare cases and/or federal buy-a-vote programs. Unofficially, sooner or later the police departments and banks will simply have to abandon entire neighborhoods due to limited resources. Maintenance on all those empty places? Protecting them all from squatters and vandals? Not gonna happen for long.

So I fully expect to see a blind eye turned at some point. But paying the utilities or the grocery bill will be a whole different ballgame…so don’t be too eager to move into an abandoned McMansion. Especially since an increasing number will be in ‘grocery deserts’ and/or unconnected to the power/gas/Internet grids. (wireless technology may help somewhat with the last part)

Dark-Star on July 20, 2010 at 9:51 PM