US housing worsens

Its now 3 months since we first saw the impact of the subprime crisis. At that time, the main impact was on poor Americans, who were losing their homes. Then, in August, banks stopped lending to each other, causing credit conditions to tighten. By September, central banks were fighting fires on several fronts:

• Injecting billions into money markets to improve liquidity
• Bailing out major mortgage lenders such as Northern Rock in the UK
• Cutting interest rates in the US by 0.5% to help avert recession

Their activities continue to be the focus of attention, but at the same time the American Chemical Council (ACC) have performed a useful service in a recent weekly report by reminding us that the original problem in housing is still getting worse, not better.

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As their chart shows, new home sales are now down 21% on a year ago, and existing homes sales down 12%. The inventory of new homes is at its highest level for 16 years, whilst that for existing homes is at an all-time record high of 10 months. Equally, the ACC comments that ‘the pace of monthly (house) price declines is accelerating as tightening mortgage lending standards and a slowing economy suggest the housing downturn will last into 2008’.

This does not bode well for future chemical demand in this important sector.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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