US housing remains weak as unemployment rises

Housing permits Nov09.jpgThe US housing market was worth $35bn a year in terms of chemical sales in 2006. In that Boom year, 2.2m homes were built, each using $16k of chemicals. But as the chart above shows, from the ACC’s weekly report, there has been a steady decline since then.

The recent introduction of the $8000 first-time buyer tax credit may have helped to temporarily stabilise the housing market, but it hasn’t led to a recovery. Starts actually fell in October to just 520k, worth just $8bn in terms of chemicals. Even in 1975, 1981 and 1991, starts only fell to 800k.

Worryingly, the delinquency rate on mortgages is still rising, reaching a record 9.6% in October, according to the Mortgage Bankers Association (MBA). And the pain of foreclosure is spreading from sub-prime loans to fixed-rate mortgages. These accounted for 44% of foreclosures in Q3.

The problem is rising and widespread unemployment. As Jay Brinkmann, the MBA chief economist told Barrons, “mortgages are paid with paychecks, not percentage point increases in GDP“.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. 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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