Residential construction drops 3.1% in July

Yesterday, the National Association of Home Builders announced that confidence among builders had dropped to a new low since March 2009.  Today, the Census Bureau and HUD explain why.  Residential construction dropped another 3.1% in July from the previous month, and is now 3.7% below that of a year ago:

Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 565,000. This is 3.1 percent (±2.0%) below the revised June rate of 583,000 and is 3.7 percent (±2.2%) below the July 2009 estimate of 587,000.

Single-family authorizations in July were at a rate of 416,000; this is 1.2 percent (±1.2%)* below the revised June figure of 421,000. Authorizations of units in buildings with five units or more were at a rate of 129,000 in July.

Housing starts had a better month, but even then, the good news remained mainly in multiple-family units.  Single-family housing starts dropped 4.2%:

Privately-owned housing starts in July were at a seasonally adjusted annual rate of 546,000. This is 1.7 percent (±9.7%)* above the revised June estimate of 537,000, but is 7.0 percent (±7.5%)* below the July 2009 rate of 587,000.

Single-family housing starts in July were at a rate of 432,000; this is 4.2 percent (±8.7%)* below the revised June figure of 451,000.  The July rate for units in buildings with five units or more was 95,000.

Small wonder the NAHB’s confidence index dropped to 13:

The National Association of Home Builders said its monthly index of builders’ sentiment about the housing market fell to 13, the lowest reading since March 2009. The index is adjusted for seasonal factors.

Readings below 50 indicate negative sentiment about the market. The last time the index was above 50 was in April 2006.

Fewer people are buying new homes, even though prices have stabilized in the past year and those who have good credit can qualify for the lowest mortgage rates in decades. The market is struggling because jobs are scarce and credit is tight. And many analysts predict home prices are likely to drop again in the fall.

“Buyers just aren’t stepping up to the plate,” wrote Mike Larson, real estate analyst with Weiss Research. “Unless and until the job market improves, we are simply not going to get any traction in the housing market.”

The slowdown in permits indicates even bigger trouble ahead.  Not all permit grants result in future construction anyway, and taking out fewer of them shows a lack of confidence in a more concrete measure.

Once again, the core of the economic malaise is unemployment.  The scarcity of jobs hits all segments of a consumer-driven economy, and as long as the US government keeps sucking up capital to expand regulation, businesses will hoard cash instead of investing in expansion and job-creating activities.  The year of stimulus has passed without healing the economy at all, and instead we’re looking at a Cash for Clunkers hangover, only applied to the entire economy — with taxpayers on the hook for the tab.

We cannot salvage the housing markets without creating jobs.  And we won’t create jobs as long as Democrats continue with their big-spending, command-economy agenda.