23 December 2009 17:20 [Source: ICIS news]
HOUSTON (ICIS news)--US new home construction dropped sharply in November with a 11.3% decline from October levels, while unsold inventories rose to their highest levels since June, the US Census Bureau said on Wednesday.
The 355,000 November housing starts were far under analyst expectations and represented the lowest level in seven months, undercutting what many thought was a developing recovery in the housing sector and running contrary to a 7% monthly increase in existing home sales.
“Very disappointing,” said Ken Simonson, chief economist with The Associated General Contractors of America (AGC). “The November total was the lowest seasonally adjusted annual rate since April, despite the new homebuyer tax credit, record low mortgage rates, and unseasonably dry and warm November weather.”
On 5 November, the $8,000 (€5,600) federal tax credit for first-time home buyers was extended for six months and expanded to include all home buyers.
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The 355,000 housing starts were down 11.3% from 400,000 in October and 9% from the November 2008 estimate of 390,000.
Analysts had expected purchases to edge up to about 438,000 in November, according to news reports. The 11.3% decline was the sharpest percentage drop since the beginning of this year.
The pace of housing starts would offer a supply of 7.9 months for unsold new homes at the current sales rate. That is up sharply from 7.2 months in October and is the highest figure since June, indicating rising inventories.
According to figures from the National Association of Realtors (NAR), existing home sales were at a seasonally-adjusted annual rate of 6.54m units, up from 6.09m in October and 44.1% higher than the 4.54m pace in November 2008.
Current sales are at the highest level since February 2007, when the selling rate was 6.55m.
While sales of existing homes do not drive chemicals consumption nearly as much as new home construction, those sales do help the new housing market by reducing the overall inventory of residential properties on the market.
The NAR said the surge in existing home sales in November continued to be driven by the tax credit.
“This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead,’ NAR chief economist Lawrence Yun said.
Yun said he expected a temporary sales drop in the near-term, but that buying activity should surge again in the North American spring. Beyond that, the market should become self-sustaining by the second half of 2010, as the economy recovers, he said.
Meanwhile, Simonson labelled the gap between new and existing home sales as puzzling, but added that he still expected improving new and existing home sales – as well as rising single-family construction - throughout 2010.
“Today’s report from the Bureau of Economic Analysis that personal income rose again in November, the recent Federal Reserve report that consumers have continued to cut credit balances, and continuing stock market increases, all tell me that consumer incomes and balance sheets are adding to the number of households with the means to buy a home,” Simonson said.
($1 = €0.70)
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