US foreclosures bode ill for a housing recovery

10 July 2008 21:26  [Source: ICIS news]

WASHINGTON (ICIS news)--US home loan foreclosures in June were 53% higher than the same month in 2007 and indicate that a recovery in the nation’s crucial home construction industry will be put back still further, housing sources said on Thursday.

 

Foreclosures were reported on 252,363 US residential properties during June, according to RealtyTrac, which monitors real estate transactions by banks.

 

Although that level of foreclosure activity marked a slight 3% decline from May, it was the second month in a row in which US banks began the process of taking back more than a quarter-million homes due to loan defaults.

 

James Saccacio, chief executive of RealtyTrac, said the year-over-year increase of more than 50% in foreclosures “indicates that we have not yet reached the top of this foreclosure cycle”.

 

As more existing homes fall into foreclosure proceedings, they eventually become empty homes for sale on the market, adding to the already swollen inventory of available properties and making a new home construction recovery more distant.

 

“There is no question but that the jump in foreclosures puts back a recovery in new home construction,” said David Seiders, chief economist at the National Association of Home Builders (NAHB).

 

“The trend is still very disturbing,” said Seiders.  The climbing rate of foreclosures means that “housing units put on the market is on the rise and will be for some time to come”, he added.

 

Recovery in the US new home construction sector is important to US chemicals manufacturers because that industry is a major consumer of a wide variety and high volumes of chemicals and chemical-derived products such as plastic pipe, insulation and siding, paints and coatings, synthetic fibres and more.

 

“These foreclosures are clearly a major issue for the home building industry,” Seiders said.

 

He said his latest forecast for a recovery in new home construction is that housing starts will turn upward by the second quarter next year.  Seiders concedes, however, that he has had to put is recovery forecast back a couple of times since late last year as housing data have continued to show declines.

 

In December last year Seiders had forecast that the US housing slump would bottom-out in the second half this year, “but I’m not seeing any numbers now that would point to a bottoming yet”.

 

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Author: Joe Kamalick
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