The unabated spread of foreclosures in the country which affects millions of homeowners has led to the decline of new home construction applications and building activity.
Data from the Department of Commerce showed that construction of apartments and new homes declined by 16.8 percent to 466,000 units in January 2009. The seasonally-adjusted yearly rate was below the expected 530,000 units. January also registered the slowest building activity for almost a half-century.
Because of uncertainties brought about by the economic and foreclosure crisis, building permit applications dropped by almost 4.8 percentage to 521,000 units. Building permit applications are used to measure future construction activity.
The falling home construction activity is just one of the problems hounding the housing market which is currently being battered by foreclosures. Because of the unprecedented number of foreclosed homes in the market offered at discounted prices, the housing market value continues to drop.
Foreclosure is also being blamed for the country’s worst financial crisis as banks attempt to cope with losses in mortgage loans.
However, market analysts are hopeful that the Obama Administration’s efforts to stem the tide of foreclosures in the country will help the home construction market recover from its current slump.
President Barack Obama is expected to unveil his plans to help owners of distressed properties and give respite to the housing market embroiled in foreclosure.
Credit Suisse data showed that over 2 million homeowners in the U.S. are in some kind of foreclosure proceedings in 2008. It is expected that the number of homeowners who are in danger of losing their properties could increase up to 10 million if the economic recession will not be addressed immediately.
Meanwhile, home construction activity in western states dropped by 6.4 percent to 131,000 housing units, the lowest rate since October 1966.
In 2008, the total number of homes that builders broke ground was 906,200. This represented a 1.36 million decline from the total number of homes built in 2007. The 2008 figures of new home constructions were the lowest since 1991.
Meanwhile, the National Association of Home Builders’ index of the housing market has climbed one point, an improvement from its all-time low rate as prospective buyers, who were sidelined by increasing defaults and worsening foreclosure crisis, showed some renewed interest which boost builders’ confidence on future market sales.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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