Quelle Surprise! New Home Construction Plunges

How could anyone have expected new home building to be anything more than anemic with housing prices expected to fall nationwide in 2011? Did some forecasters miss the fact that there are a lot of foreclosures in the pipeline given the current level of serious delinquencies as well as a lot of shadow (homeowners who would like to sell but are not putting their homes on the market due to depressed prices in their market?)

From Bloomberg:

Housing starts in the U.S. plunged to the lowest level in almost a year in February and wholesale prices rose more than forecast, hurdles for a recovery that the Federal Reserve said yesterday is on a “firmer footing.”

Home construction dropped 23 percent to a 479,000 annual rate, while building permits slumped last month to a record low, Commerce Department figures showed today in Washington….

Morgan Stanley and RBS Securities Inc. were among firms that reduced first-quarter growth estimates after the Commerce Department’s housing starts figures. Economists at Morgan Stanley trimmed their forecast to 2.8 percent from 2.9 percent, while RBS Securities reduced its projection to 2.6 percent from 2.8 percent….

Housing starts were forecast to fall to a 566,000 annual rate, according to the Bloomberg survey of 74 economists whose estimates ranged from 537,000 to 638,000.

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  1. Guy Fawkes

    Yesterday, I engaged in a lively discussion with the outgoing administrator of the FHA, David Stevens. Incidentally, he is leaving to run the Mortgage Banker’s Assoc. I told him exactly what we are seeing today…people losing this foreclosure fight will never ever put their money into real estate.

    If I lose my fight, I will never, never, never sign a mortgage again. NEVER.

    The looting of the bankers was extremely short-sighted. Many, many people in the younger generation are seeing what can happen with an investment in real estate. I believe we are grooming a generation of renters.

    Also, the commercial bankers are still not understanding….you don’t play fair, and people can take their money and walk. Look at what is happening with M&I Bank. This will continue. The “move your money” campaign is still being conducted…and now people are starting to see that their monthly contribution to the big banks need to be withdrawn.

    We have a lot to learn as a society.

    1. sgt_doom

      If I lose my fight, I will never, never, never sign a mortgage again. NEVER.

      Wow, strong words, consumer. I say “consumer” as you definitely don’t sound like a citizen.

      I average about one adult-level conservation each decade with an American citizen — that’s one in 2000-2010, one in 1990-1999.

      Why? Because like you, they are perennially clueless, spending all their time in consumer activities: sports viewing, TV and movie viewing, various other consumer-oriented entertainment, nothing citizenship-oriented.

      The other day I overheard three conversations: (1) between a 50s-age fellow and an 70-year-old fellow, only about the actor Sheen (I don’t know his first name); (2) another between late 20s-age and early 30s-age fellows, concerning Sandra Bullock’s boyfriend who left her for some tattooed woman; and (3) late teens, early twenties group about someone running onto a stage to disrupt an award recipient, or something like that.

      That’s how the typical American ConsumerTard rolls.

      In Detroit, they are as clueless about what’s occurring with the privatization of everything agenda; similarly in once semi-aware Seattle. It is the epidemic of ignorance across the country (non-sovereign type).

      In Wisconsin, consumer weenies continue to claim, “They’ve awakened a sleeping giant.”

      “Sleeping giant” my citizen’s butt; those morons voted in a crook with an established record of privatizing municipal union jobs. PERIOD!

      Just like those morons in Michigan and Florida who elected super-crooked governors. Typical American ConsumerTards!

      They’ve relocated the production assets offshore; they’ve relocated the capital assets offshore.

      And while everyone was watching their sports, their movies, etc., they’ve dismantled what was left of the American economy over the past 35 years.

      One consistely overhears idiots whining about not being hired, completely ignorant of what’s been transpiring over their lifetimes, as if they are mindless Zombie ConsumerTards.

      Oops! They are…..

      1. F. Beard

        Oops! They are….. sgt_doom

        And why not? Their purchasing power is stolen via the government enforced counterfeiting cartel so it can be loaned to corporations to produce more consumer goods and MAYBE give the victims jobs.

        That is our implicit social contract. Our money system steals purchasing power supposedly for the benefit of the victims. Well, we now learn once again the folly of violating “Thou shalt not steal” and the commandment against usury between fellow countrymen in Deuteronomy 23:19-20.

      2. DP

        “only about the actor Sheen (I don’t know his first name”

        Sure you don’t, faux elitist gasbag.

      3. Bill

        Your use of the word tard is offensive to me. Please be a little more sensitive to people with disabilitys. thanks

    2. Rabid Cranky Troll

      Oh it’s worse than that. I’m telling everyone who is willing to listen that we need to kill all the Bankers and Wall Street people, confiscate every red cent they’ve made over the past 40 years, and redistribute it back to the poor and the middle class.

      So they’re not just losing some customers here. More and more peasants are beginning to realize what they’ve done to their country. And more and more peasants are coming to the realization that only pitchforks and guillotines will work.

      1. Toby

        And then what? A new ‘elite’ will take over and it will be “hello new boss, just like the old boss” all over again.

        Unless the money and the education systems are totally revolutionized. Both need to be as democratic and open as possible. Both must be prevented from churning out zombie consumers who don’t know shit from Shynola. We have to be as sure as we can be that no citizen can ever again have the wool pulled over his or her eyes by an ‘elite’ with total control of information and money flows. Take the ‘elite’s’ toys away and make certain no future group can do as much damage as the current crop has done.

        A revolution is needed, that’s for sure. But a very good idea of how to prevent a sociopathic/psychopathic ‘elite’ from emerging and running the show the very next day is even more important. In fact that is the revolution. Self-educate folks, because we’re the only ones who can get this done. Forget the politicians and the CEOs; forget TV, advertising and fame, and start learning!

        Demote money, promote wealth.

        1. jonboinAR

          I don’t know how much the passive voice you employed describes reality in this instance, and how much it doesn’t. Is the problem of understanding due to having not been given the proper education or is it more willful on the part of the citizen? I work as a serviceman in a semi-rural area. I go house to house all day. EVERYONE watches Fox News. My client, the retired doctor, watches Fox. Another, a local plant manager, watches Fox. This week I was in the local hospital administrator’s house. Educated lady, beautiful original artwork, tastefully arranged, had Fox News on. Kind of discouraging.

  2. dirtbagger

    Can’t remember the source, but average new housing starts for US is around 1.2 million units. This includes requirements for an increase in population and replacement of old housing stock.

    Assuming this number is correct, net housing absorption is currently about 700k units annually. Lots of guesses out there on the housing inventory overhang, somewhere between 6-8 million units.

    Regardless of ones base assumptions, it is very difficult to make the argument that the housing market is going to bottom or stabilize in the near term.

  3. Wilbur

    The real economy is double dipping hard. The current so called “growth” is on pure money printing and massive government borrowing.

    1. if they expect japan earthquake will increase demand of US export, they might be right. But only for big capital goods, (utility, turbines, high end metals) the rest will be supplied by asia and china.

    2. Oil price will get worst as protest in middle east is not resolve (libya, bahrain, yemen)

    3. food inflation is burning all over the world.

    4. US big banks, euro fringe economies haven’t been fixed at all. They just keep printing money and wish for the best.

  4. Jay

    Stock analysts famously rate on a scale from “buy” to “hold”, with “hold” being a widely understood euphemism for “sell” because actually saying “sell” is tacitly forbidden. I suspect that housing analysts have a similar system, with allowable forecasts ranging from “housing is rising rapidly” to “housing will rise rapidly in six months”.

  5. Schofield

    Terrible thing is no thinking individual now expects either the Democrat or Republican politicians to provide any feasible solutions to the economic problems since they’re all seem to be in thrall to the bankers who know diddly squat. It’s like you’re best option is to turn into Rip Van Winkle and take a 100 year nap and hope people will come to their senses during that period! Zzzzzzzz…….

    1. armchair

      Maybe the consumertards that sgt_doom is complaining about, are actually deploying a cynical but correct strategy. The system is broken, why bother paying attention?

  6. Max424

    The housing market is practically booming. How do I know this? Kramer told me. Kramer told me recently that sales were up at Home Depot; and HD also made a nice two month move on the NYSE — surging from 30 to 38.

    According to Kramer, regarding the state of homeowner/underwater/ship in America, that is all ye need to know.

    1. ForgottenPsuedonym

      I’ve seen similar chatter occasionally hyping Toll Brothers and similar stocks on various blogs. I can’t imagine what these people are smoking. Or else it is part of a pump and dump strategy. I’d buy swampland in Florida before I’d buy a large scale home builder.

  7. Psychoanalystus

    What!? New home construction plunges? I am shocked! This is a total surprise. So unexpected…


  8. john bougearel

    Actually, this story “Home Construction in U.S. Slumps, Producer Prices Rise in Recovery Hurdle” from Bloomberg that you post from By Alex Kowalski and Shobhana Chandra – Mar 16, 2011 3:25 PM CT reads quite a bit less dire than the earlier post “U.S. Housing Starts Fell in February to Lowest Since April 2009 2011-03-16 12:30:01.128 GMT By Alex Kowalski

    which reads:

    “March 16 (Bloomberg) — Housing starts in the U.S. declined
    more than forecast in February to the slowest pace since April 2009 and building permits slumped to a record low…

    Beginning home construction dropped 22.5 percent to a
    479,000 annual rate, Commerce Department figures showed today in Washington. The decline from January was the biggest since March 1984….Starts in fell in all four regions, led by a 49 percent drop in the Midwest to a record low. Starts declined 38 percent in the Northeast, 28 percent in the West and 6.3 percent in the South….Foreclosure filings will climb about 20 percent in 2011,reaching a peak for the housing crisis, RealtyTrac said Jan. 13

    The second article whitewashed the knowledge that the 23% decline from January was the worst decline in 27 years. Additionally, the second article got their facts wrong, intentionally or not. The actual number of Not only that, the 479,000 actual housing starts inf Feb was the worst since May 2009. The Feb housing starts was the third worst on record ever that I can recall, behind May 2009 and Feb 2009 (the 2nd worst ever that I can recall).

  9. Rick Moss

    Most people with a brain know this whole recovery non-sense is just that.

    Wake up America. We don’t have to live like this. You have choice. Join us…


    Read “Common Sense 3.1” at ( http://www.revolution2.osixs.org )


    “Spread the News”

  10. Destry Vargaz

    Despite what Gordon Gekko might preach, greed is NOT good. The construction industry continues to consolidate, and many builders and contractors have gone from the heady go-go days of building anything anywhere and making fat money, to hustling for renovation and repair work. This is both good and bad – bad in that a lot of people are hurting, good in that it shakes out the excesses and lets the cream rise to the top. Those honest and competent builders will adapt and survive, while the fly-by-nighters will move on to some other venture.

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