House Construction Rose, Number of Permits Fell

Reblogger Tamra Lee Ulmer
Real Estate Broker/Owner with Arizona Resource Realty BR518926000

Original content by James Foxx

The number of house construction projects rose during April 2010 in the U.S. However, construction permits also fell during the month. This led real estate analysts to assume that the recovery of the residential construction industry is only temporary.

According to industry analysts, the rise in the number of new home construction was largely due to homebuyers taking advantage of the federal government’s tax incentive offer, thereby providing builders with more projects than were expected.

Statistics showed that building permits dropped by 11.5% in April, the lowest level for the indicator since October 2009. Construction permits are used by housing market analysts to predict future building activities. Meanwhile, new dwellings and apartment construction activities rose by 5.8% for April.

Despite the rise of residential construction activities, housing market analysts are predicting that it will not last since they expect housing sales to decline in the second half of 2010. According to them, the expiration of the tax credit, high unemployment rates and tight mortgage lending rules will all contribute to the decline in dwelling sales. This, in turn, would cause house construction activities to drop.

The April rise in residential building activities was the highest level reached by the sector since October 2008. The numbers were largely helped by a ten-percent increase in construction projects involving single-family dwellings. Building activities were up over 40% from Aril 2009, but recorded a decline of 70% when compared with January 2006, the period when housing construction activities were at their peak.

Although industry analysts are predicting that the upward trend cannot be sustained for the rest of the year, homebuilders remain optimistic as evident in the industry confidence index of the National Association of Home Builders which recorded a three-point rise. The April index is the highest it has ever been since August 2007.

Another significant factor for the building industry is the rise of new home sales in March, which recorded a 27% increase. However, the number translates to a 70% decrease when compared with the industry peak of July 2005.

House construction activities in the U.S. rose in April, but building permits recorded a decline. Industry analysts have explained the rise as mainly due to the federal tax credit initiative. They also stated that the decline in permits means that the recovery is a short-lived one.

Original Post: House Construction Rose, Number of Permits Fell on ForeclosureDeals.com.

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Rainmaker
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Aaron Silverman
SuccessfulRental.com, Bluewater Property Management, LLC and Lowcountry Turnkey Properties, LLC - Charleston, SC
Improving Real Estate Experience through Education

I will never understand analysts - "This led real estate analysts to assume that the recovery of the residential construction industry is only temporary."  Any analyst that referred to the last few months as a sign of recovery needs to look at the big picture of what is driving demand.

The author the blog correctly points out the factors that greated the elevated demand.  "Analysts" that labeled those months as the start of the recovery will be the same ones to say we are in another slump in the coming months.  Once again they will be wrong, because they are not looking at the reason behind the decrease in sales.  Over all there is not a decrease in sales; they were simply shifted.

Good article to re-blog.

Aaron

May 27, 2010 09:44 AM #1
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Tamra Lee Ulmer

FORCE~NRBA ~ Over 1000 REO Assets SOLD!
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