The Commerce Department and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for September 2010 this morning, and they were, in a word, mixed.
Specifically, the government reported that new privately-owned units under construction rose slightly to 610,000 on an annualized basis in September, from an upwardly revised 608,000 starts in August. That made September the third month in a row that units broken ground on rose in this country. However, even with this improvement, housing remains woefully depressed, with such activity just about a quarter of what it had been at the peak of the cycle in early 2006.
Worse still, building permits, normally considered by some as a harbinger of things to come on the building front fell to 539,000 units on an annualized basis last month, from 571,000 the month before. By way of comparison, permits were at 685,000 in March of this year, as builders were more optimistic on the strength of more buyers being able to afford such purchases via their use of the now-expired homebuyer tax credit.
Meanwhile, on a brighter note, starts reached their highest level since the April 30, 2010 expiration of the aforementioned home-buying incentives. This was a somewhat better showing in this category than had been expected by economists. Housing, though, remains woefully depressed because of the weak employment outlook. Indeed, with jobs still scarce and the jobless rate remaining near 10%, the prospects for this key sector continue to be bleak for the short-to-intermediate term.
Of course, weak job prospects are not all that are vexing potential homebuyers. They are also being discouraged by soft prices and the potential for further price slippage in the months to come. Also, it remains difficult to secure a mortgage in many locales, as gun shy lenders are continuing to toughen borrowing requirements in many cases.
At best, we continue to expect a slow, irregular, and painful comeback in this troubled sector, and one that could well take another two years to revive--even partially. We think it will be many years before a new peak in home construction and home buying is at hand. Confidence, now very weak, will need to stage a long and steady recovery before aggressive buying returns to this once-flourishing economic sector. Housing is critical to the economy, and, indeed, a full and strong business revival will be held at bay until this area recovers much more definitively, in our view.