US new home construction plummets in October

18 November 2009 14:54  [Source: ICIS news]

WASHINGTON (ICIS news)--US new home construction fell sharply in October with a 10.6% decline from September levels, and building permits - a key measure of near-term residential building plans - dropped by 4%, the Commerce Department said on Wednesday.

It marks the sharpest decline in housing construction since the beginning of this year and undermines what many thought was a developing recovery for the sector.

The housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals and chemicals-based products such as plastic pipe, insulation, paints and coatings, adhesives and synthetic fibres, among many others.

The fall-off was seen throughout the housing industry, with housing starts for single-family homes down by 6.8% in October compared with September, and construction of apartment buildings plummeting by more than 33%.

The decline in single-family home construction - regarded as the core of the sector - followed a revised 6% gain in September.

The drop likely will be attributed to concern among potential home buyers that the $8,000 (€5,360) federal tax credit for first-time home buyers was due to expire.

That tax credit, which went into force at the beginning of this year, was to expire on 30 November. Although Congress on 5 November extended and broadened the credit for six months, home shoppers in October could not have been certain of that. 

Contracts for new homes made in October would not have closed by the end of November, so potential buyers may have feared that the tax credit would not be available to them.

The department said that housing starts in October were at a seasonally adjusted annual rate of 529,000, which is 10.6% below the revised September figure of 592,000 and nearly 31% below the 763,000 new homes built in October last year (also on a seasonally adjusted, annual basis).

Building permits issued in October were at a seasonally adjusted annual rate of 552,000, down 4% from September’s revised figure of 575,000 and 24.3% below the pace of 729,000 seen in October a year ago.

Local governments issue building permits to contractors when they are ready to break ground on a new project, so the number of permits issued each month is seen as an accurate real-time barometer of the housing sector’s near-term prospects.

US Housing Starts

	Oct ‘09	Sep ‘09	Sep-Oct ‘09	Oct ‘08	Oct ’08 to Oct ‘09
US Housing Starts	529,000*	592,000*	- 10.6%	763,000*	- 30.7%

* Seasonally adjusted & annualised

($1 = €0.67)

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