Our Changing Globe

Archive for the ‘home construction’ Category

The Commerce Department reported on Tuesday March 2009, that construction of new homes and apartments jumped by 22.2% from January to February, to a seasonally adjusted annual rate of 583,000 units.

Moreover, applications for building permits, which are generally considered to be a reliable sign of future activity, also rose in February by 3% to an annual rate of 547,000.

The number of new housing projects that builders broke ground on was mostly in apartment construction and came in spite of forecasts by analysts that there would be a drop in construction to around 450,000 units.

The west of the country which led the housing boom was the only area not to experience a rise and February’s increase needs to be seen in the context of January’s dismal showing of 477,000 units which set a record low, and even February’s rate was down 47.3% from a year ago.

Figures contained in a report by Credit Suisse last month indicate that over two million American homebuyers faced foreclosure proceedings last year, and it’s thought likely that the number could rise to around ten million over the next two to three years.

Many would be buyers have been unable to obtain mortgages due to the tighter lending standards brought about by the credit crisis and unemployment is at a twenty five year high of 8.1%.

The National Association of Home Builders’ housing market index was flat for March at a reading of just nine points, being just one point above January’s all time low. The figure has been below ten since November with any number below fifty being a negative one.

An official that administers the ‘Troubled Asset Relief Program’ recently wrote to twenty banks including Citigroup Inc. and Bank of America Corp requesting details of their purchases of mortgage-backed and asset-backed securities.

The reason for the letters is that the U.S. Treasury is under pressure to revive lending but wants greater clarification of what was done with the monies that were already doled out to the banks in question.

In particular, the Treasury wants specific information on first time mortgages, home equity and credit card loans as well as a summary of other types of consumer lending and the requested data also includes commercial real estate lending and consumer and industrial loans.

As was anticipated, Treasury Secretary Henry Paulson’s is already becoming a scapegoat and aides close to Obama are already accusing him of lack of transparency and of not having done enough to get additional credit flowing through the system.

Obama advisers are already calling for more accountability from banks that received taxpayer money and David Axelrod who is Obama’s chief political adviser has already stated that the new team will manage the TARP (Troubled Asset Relief Program) in a “much different way” and amongst alternatives under consideration are the setting up of a government-backed bad or aggregator bank to hold the securities, or leaving the assets on banks’ books and providing a government guarantee.

Lawrence Summers, who is the director-designate of the ‘National Economic Council’ had this to say when interviewed on CBS’s ‘Face the Nation’, “Anyone who looks at it has got to be disappointed when they look at what’s happened to lending, has got to think the results have been unsatisfactory”.

However Kashkari is on record as saying that, “As long as confidence remains low, banks will remain cautious about extending credit, and consumers and businesses will remain cautious about taking on new loans but as confidence returns the Treasury expects to see more credit extended”.

The bottom light might be however that even though pressuring banks to increase lending runs the risk of encouraging more bad loans it would seem that borrowers might need to be encouraged too because if they don’t borrow then the banks will fail.