US Housing Starts Slump, Thanks to Oversupply

June housing starts, the number of new homes and apartments builders have started constructing, were at the lowest levels since October 2009. Bloomberg has more on this simple supply-and-demand scenario:

…a slump in sales following the expiration of a government tax incentive caused U.S. builders to cut back.

Work began on 549,000 houses at an annual rate last month, fewer than the median estimate of economists surveyed by Bloomberg News and down 5 percent from May, Commerce Department figures showed today in Washington.

The retreat following the end of government support shows it will be difficult for the industry that precipitated the recession to sustain a recovery. Mounting foreclosures will swell the supply of houses on the market and pressure prices, while prospective buyers shy away as a lack of jobs shakes confidence in the world’s largest economy.

“Given the excess of existing homes for sale, there is no rush to boost starts significantly,” said Jim O’Sullivan, chief economist at MF Global Ltd. in New York, who forecast a decline in starts to 550,000. “There has been volatility in the data because of the tax credit. The best you can say is the big drag on growth from housing ended a year ago.”
The US has had an oversupply of housing for what, 2 years now? Building anything right now is risky, outside of the few regions that still hold promise for developers. I’m surprised the government tax incentive caused as much construction as it did.

Oddly enough, building permits are up this month, a sign that indicates increased construction down the road. The question is when.

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