Construction of new homes have officially fallen to the lowest level in 16 years. While this may help existing spec home sales, the drop will continue to erode the economy.
Single-family home starts were reduced to an annual rate of less then 830,000 units per year, at one point this number was nearing the 2,000,000 mark per year.
24% less home are being constructed today, then were being built one year ago, this signals a three year decline of housing starts.
In-turn, banks and mortgage companies are seeing a rapid increase of foreclosures and defaults. The squeeze by local and national banks will curve future growth of new housing, thus keeping economic growth to a minimum.
With the housing industry draining the coffers of the US economy through expanded unemployment and bankruptcies the word of recession linger not far behind.
Many builders are diluting their inventory through major price reductions and incentives, therefore leading to reduced equity for homeowners whom had purchased homes from the same builders not even a year ago.
The domino effect of the housing industry will be felt by all sectors.
Now is the time to buy, but with the lowest level of buyers confidence in years, this slump may continue well into 2010 or beyond.
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