The number of house construction projects rose during April 2010 in the U.S. However, construction permits also fell during the month. This led real estate analysts to assume that the recovery of the residential construction industry is only temporary.
According to industry analysts, the rise in the number of new home construction was largely due to homebuyers taking advantage of the federal government’s tax incentive offer, thereby providing builders with more projects than were expected.
Statistics showed that building permits dropped by 11.5% in April, the lowest level for the indicator since October 2009. Construction permits are used by housing market analysts to predict future building activities. Meanwhile, new dwellings and apartment construction activities rose by 5.8% for April.
Despite the rise of residential construction activities, housing market analysts are predicting that it will not last since they expect housing sales to decline in the second half of 2010. According to them, the expiration of the tax credit, high unemployment rates and tight mortgage lending rules will all contribute to the decline in dwelling sales. This, in turn, would cause house construction activities to drop.
The April rise in residential building activities was the highest level reached by the sector since October 2008. The numbers were largely helped by a ten-percent increase in construction projects involving single-family dwellings. Building activities were up over 40% from Aril 2009, but recorded a decline of 70% when compared with January 2006, the period when housing construction activities were at their peak.
Although industry analysts are predicting that the upward trend cannot be sustained for the rest of the year, homebuilders remain optimistic as evident in the industry confidence index of the National Association of Home Builders which recorded a three-point rise. The April index is the highest it has ever been since August 2007.
Another significant factor for the building industry is the rise of new home sales in March, which recorded a 27% increase. However, the number translates to a 70% decrease when compared with the industry peak of July 2005.
House construction activities in the U.S. rose in April, but building permits recorded a decline. Industry analysts have explained the rise as mainly due to the federal tax credit initiative. They also stated that the decline in permits means that the recovery is a short-lived one.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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