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Bank and HUD Foreclosures Contribute to New Home Market Decline

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By : John Cutts    99 or more times read
The high number of foreclosed properties, including HUD foreclosures, has contributed to the decline of the new home market in several areas of Pennsylvania last year, according to housing industry observers. The slowdown in housing starts also resulted in the poor performance of related industries, such as furniture, lumber, and household appliances.

The surge in the supply of foreclosed homes in Philadelphia and in the rest of the state meant that the market was flooded with cheap residential properties, making it more difficult for home builders to get a higher share of the housing market. In Pittsburgh, housing starts declined to their lowest level in over 16 years. This was despite a last quarter surge that saw fourth quarter numbers rising considerably.

However, foreclosed homes in PA and the poor condition of the job market prevented fourth quarter figures from making up for the low numbers recorded in the first three quarters. Pittsburgh housing starts totaled 2,778 for the full 2010 calendar, representing a drop of 1% compared with 2009 figures. For October-December 2010, a total of 1,517 permits were issued for the construction of single family dwellings, representing a rise of 27% from the 2009 fourth quarter.

Although single family home construction held its own against bank and HUD foreclosures in the fourth quarter, its strong performance was negated by the huge decline in the multifamily sector. Construction activities involving multifamily units declined to 851 during last year's fourth quarter from the 1,290 recorded in the same quarter of 2009. The decline was a massive 34%.

The downturn in the new housing construction market and an oversupply of foreclosed homes in Pittsburgh were largely blamed for the closure of several related businesses in the area. One example was furniture company Roomful Express, which announced in December 2010 that it has decided to shutdown its business. The company failed to pay for its loan worth $18.8 million.

Local analysts stated that the multifamily property segment should improve to pull up the home construction market. Most of them expect housing starts to improve this year, but any improvement will be minimal as the number of bank and HUD foreclosures in the region is expected to remain high for the rest of the year.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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