Single Family Home Construction Down

I don’t expect a rebound in home prices for three years.

Similarly, I don’t expect a boost in home construction for at least three years.

There are just so many unsold homes on the market, so many homes going into foreclosure each month, so many foreclosed homes waiting to come on to the market, that there is far more downward pressure on home prices than upward pressure.

Housing traditionally accounts for 15-20% of economic growth, but since 2007, it has only accounted for 4%. Housing remains a significant drag on economic growth.

The construction of new homes have a dramatic effect on the economy, boosting employment. Each new home adds on average three jobs to the economy and about $90,000 in new tax revenue.

With so many homes available for purchase at declining prices, it makes less sense to build new homes.

Pushing interest rates lower and expecting to wring new demand for housing out of it reminds me of the saying about squeezing blood out of a rock.

The Washington Post reports:

The Commerce Department said builders began work on a seasonally adjusted 604,000 homes last month, a 1.5 percent decrease from June. That’s half the 1.2 million homes per year that economists say must be built to sustain a healthy housing market.

Single-family homes, which represent 70 percent of home construction, fell 5 percent. Apartment building rose more than 6 percent.

…The number of homes under construction in July was the fewest in 40 years. Just 413,000 homes are under construction, after accounting for seasonal factors. A decade ago, roughly 1.6 million homes were built.

Building permits, a gauge of future construction, declined 3.2 percent in July. Jill Brown, vice president of economics at Credit Suisse, said that decline suggests “very little forward momentum.”

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (, he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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