As the excess inventory of new homes built during the boom years continues to be slowly absorbed, the number of new homes started has fallen to an all-time low -- at least since records were first kept in 1959. From an AP story via the LA Times:
New-home construction plunged to an all-time low in December, capping the worst year for builders on records dating back to 1959.
The Commerce Department reported today that construction of new homes and apartments fell 15.5 percent to an annual rate of 550,000 units last month. That shattered the previous low set in November...
For all of last year, the number of housing units that builders broke ground on totaled just over 904,000, also a record low. That marked a huge 33.3 percent drop from the 1.355 million housing units started in 2007. The previous low was set in 1991.
The report also showed that applications for building permits -- considered a reliable sign of future activity -- sank to a rate of 549,000 in December, a 10.7 percent drop from the previous month...
The National Association of Home Builders/Wells Fargo housing market index, released Wednesday, dropped one point to a record 8 in January. The index was at 9 for the previous two months. Index readings higher than 50 indicate positive sentiment about the market. But the index has been below 50 since May 2006, and below 20 since April...
Thursday, January 22, 2009
New home starts fall to all-time low
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This economic mess started with the housing market and likely won’t recover until the housing market recovers. Why can’t the banks/lenders drop mortgage rates to the 3.5% area, keeping them in line with the historical margin (1%) above the 10 year treasury? Maybe use some of the $350 billion+ bailout money to help subsidize it, if needed. Maybe get some useful help from the government.
If homeowners could refinance their mortgages and save hundreds of dollars every month on their payments it would have a much greater affect on the economy then a one-time check for $500 (which really does nothing), and it wouldn’t cost us taxpayers anything. If people saw rates at 3.5% and knew they were only going to be there for a few months to a year, I believe we would see people stampeding to buy houses.
The other thing that could/should be done regarding refinancing is figuring out a way to allow just about everyone to do it. No more Loan Modifications. Just let everyone get their payments to something they can afford and hopefully create extra income for most. Spending would pick up, saving many businesses, creating additional income and ultimately additional tax revenue.
Why wouldn’t this work? What am I missing?
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