Wednesday, May 19, 2010

BUILDING PERMITS DROP AS TAX CREDITS END

We all knew it would happen but everyone hoped that it wouldn’t.   Guess what folks?  It happened!

Housing starts were way up in April but building permits are falling and analysts say that the second half of this year could be flat lining because there is no more help coming from the FED.

AP-HOUSING-STARTS-051810

Here are excerpts from yesterday’s AP story:

Construction of homes surged in April to the highest level in 18 months, fueled by buyers capitalizing on an expiring tax credit. Permits for new construction sank, signaling the rebound could fade.

Low mortgage rates and two tax credits — up to $8,000 for new buyers and $6,500 for current owners who buy and move into another home — have boosted home sales this year. To receive a tax credit, borrowers had to have a signed offer by April 30 and must close the deal by the end of June.

The rate of home building has now risen more than 40 percent from the bottom in April 2009, though it's still down 70 percent from the decade's peak in January 2006.

Without the tax credit, analysts say home sales will slow in the second half of this year. High unemployment and tight lending standards will likely help keep many buyers away.

The report Tuesday from the Commerce Department said the rate of construction of single-family homes and apartment buildings rose 5.8 percent last month to a seasonally adjusted annual rate of 672,000. That was up from an upwardly revised March level of 635,000. The rate, the highest since October 2008, was driven by a 10 percent increase in single-family home building.

Still, a survey Monday showed homebuilders are feeling more optimistic. The National Association of Home Builders said its housing market index, which tracks industry confidence, rose three points this month to 22, the highest reading since August 2007. Readings below 50 indicate negative sentiment.

A four-decade low stockpile of new single-family homes, combined with low interest rates and prices, has made home buying affordable, said Sal Guatieri, an economist with BMO Capital Markets. That means that even without the tax credits, housing starts should rise modestly.

"Until the foreclosure wave ebbs and the overhang of unsold existing homes abates, the recovery in homebuilding will be subdued, Guatieri said.

In related news, big tract builders are putting holes in the ground as fast as they can

In Las Vegas for example, their is a “gold rush” of new home buying happening.  Even though existing homes in Vegas have lost over 50% of their value the past several years, buyers are lining up to put deposits on lots for homes to be built this year.

The feeling there is that they can buy a brand new home quicker than they can purchase a foreclosed one and don’t have to shell out thousands of dollars to make repairs like would have to with vacant used homes, some having been unoccupied for several years with no utilities turned on and baking in the Vegas summer heat.

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