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U.S. Housing Starts Unexpectedly Fall To Record Low

Michael Redbourn — Tue, 19 May 2009 19:50:12 +0000

Just released Commerce Department figures indicate that U.S. housing starts dropped to a record low of 458,000 in April.

A 13% decline to an annual rate of 458,000 was led by a 46% decline in multi-family starts, compared to March when builders broke ground on 525,000 homes.

Building permits, which are a sign of future construction fell by 3.3% to a record low rate of 494,000 and taken together the two declines suggest that house prices have not yet reached rock-bottom.

So called experts had forecast an increase to a 520,000 annual pace from a 510,000 previously estimated pace the prior month, and they also forecast that building permits would increase to 530,000 annual rate.

But to give credit where it’s due, Maxwell Clarke, who is the chief U.S. economist at IDEAglobal Inc said even before the report came out that, “Weakness in housing continues. Declining prospects for developers should continue to act as a drag on investment and overall output in 2009″.

Mixed in with the bad news was a little good news however, because construction of single-family homes rose 2.8% to a 368,000 rate, and that was for the second straight month.

Overall the housing market is showing some signs of stabilization and confidence amongst U.S. homebuilders in May increased to the highest level since September, and although sales of new homes are still 70% below their 2005 highs, they have risen slightly from their record January lows.

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The Economic News Is Both Good And Bad

Michael Redbourn — Thu, 30 Apr 2009 09:23:23 +0000

New home sales did better than expected in March.
But they still fell by 0.6% last month.

Median home-sale prices in March were around $7,000 higher than in February.
But they are still far lower than they were a year ago.

Some banks have started returning bailout money amid reports of better than expected profits in the first quarter of 2009, and the stock market has rebounded since early March.
But, the value of the Dow Jones Industrial Average is still at around 60% of what is was a year ago.

Consumer confidence is rising, and consumer spending rose 2.2% in the first quarter which is the most in two years.
But businesses cut spending on equipment and software by 33.8% in the first quarter.

The administration claims that 2,000 new transportation projects have already been approved under the stimulus package.
But the construction sector lost 626,000 jobs between December 2008 and March 2009.

And whilst we’d truly love to believe that the economic crisis has bottomed out, the IMF (International Monetary Fund) estimates that the global economy will contract by 1.3% in 2009 and the U.S. economy by 2.8% which would be the most since 1946.

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Consumer Confidence Increasing In April

Michael Redbourn — Fri, 17 Apr 2009 06:43:20 +0000

After reaching a three-decade low of 55.3 in November, the Reuters/University of Michigan preliminary index of consumer sentiment rose to 58.5 from 57.3 in March, based on an average of sixty one estimates, and it is hoped than an improvement in confidence may help sustain a recovery in consumer spending, which accounts for 70% of the U.S. economy.

The Commerce Department said yesterday (April 16th) that builders broke ground at an annual rate of 358,000 on single-family homes in March, which although unchanged from the previous month, suggests that the housing market may have reached bottom, and The National Association of Home Builders/Wells Fargo confidence index also rose this month to its highest level since October.

James O’Sullivan, who is a senior economist at UBS Securities LLC in Stamford, Connecticut said, “The economy has started to show signs of improvement. Given all the policy action and mortgage rates coming down, we are starting to see less pessimism”.

Federal Reserve Chairman Ben S. Bernanke said just one day before the report was made public that, “the signs of stability make for a potential first step toward a recovery from the downturn that started in December 2007″.

Other encouraging news is that reports by the Philadelphia Fed and New York Fed earlier this week showed manufacturing shrinking at a slower pace this month, and according to the Labor Department, the number of Americans applying for first-time jobless benefits unexpectedly dropped last week to the lowest level in almost three months.

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Black Monday – More Job Cuts Around The Country!

Michael Redbourn — Tue, 27 Jan 2009 05:36:00 +0000

A slew of major job cuts was announced on Monday January 27 and the announced cuts were by big companies in different States and they came in various industries and job classes.

The total number of job losses announced came to around 50,000 with the highest number occurring at Caterpillar (CAT) which announced that it would cut approximately 20,000 jobs over the next few months which amounts to one fifth of its total workforce.

The cuts can most likely be attributed to the lack of building starts and a company spokesman said it was cutting jobs because, “financial markets remain under stress and expectations for 2009 have deteriorated” and added that the cuts are in line with at least a 25% decrease in sales for the year”.

The company did not clarify however where the job cuts would come from or when they would be implemented.

Pfizer (PFE) announced that its merger with Wyeth (WYE) would engender around 18,000 job losses which equates to approximately 15% of the company’s combined work force.

Pfizer had already announced job cuts in recent weeks that included both scientists and sales staff and its CEO Jeff Kindler said “the cuts would be difficult and painful but very necessary”.

Sprint Nextel (S), which is a wireless and broadband company announced that it would cut about 8,000 jobs over the next three months which would equate to approximately 13% of Sprint’s work total workforce. Sprint’s CEO Dan Hesse said, “Labor reductions are always the most difficult action to take, but many companies are finding it necessary in this environment”. It is hoped that the job cuts will save the company about $1.2 billion a year in labor costs and it was noted that additional jobs cuts might occur if the economy didn’t improve.

Home Depot (HD), which is the nation’s largest home-improvement retailer, announced that it would be cutting about 7,000 jobs in the coming months due to the downturn in the housing market and said that the cuts will primarily be in office operations and that its upper management will likely be reduced by around 10%.

And to round off a real black Monday, General Motors (GM) said it would be laying off a 2,000 additional workers in the next few months and that more downtime can be expected at many of its plants.

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U.S. House Prices And Starts Drop The Most On Record

Michael Redbourn — Fri, 23 Jan 2009 06:15:00 +0000

A Commerce Department report released yesterday states that house prices in the U.S. fell by the most in over eighteen years with November prices declining by 8.7 percent from a year earlier.

Moreover, housing starts fell 16 % last month to an annual rate of 550,000 which is the lowest since the government started compiling statistics in 1959.

A major cause is reckoned to be the record number of foreclosures and the highest jobless claims in over twenty six years.

The U.S. lost more than 2.6 million jobs in 2008, the most since 1945, and U.S. stocks had their worst performance since the ‘Great Depression’ and the number of U.S. houses in foreclosure last year rose to an all time high of 2.3 million.

The West Coast which includes California showed the sharpest declines in the house price index and the value of homes there fell by 22 %.

Furthermore, there’s no sign that the housing market has hit rock bottom and many observer believe that data will continue to show a worsening trend until at least 2010.

Shares in construction companies fell 76% over the last three years and builders are slashing their margins to compete with the prices of foreclosed properties which always sell at steeply discount prices and this fact offers perhaps one of only upsides to all the gloom and despair.

There are now some incredible deals available to those that can qualify and banks need to loan money to stay in business so provided you believe that you’ll keep your job this might be a great time to consider purchasing a property.

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December Housing Starts At All Time Low

Michael Redbourn — Sun, 18 Jan 2009 05:16:00 +0000

The latest figures coming in suggest that U.S. builders started work on the lowest number of houses since records began and building permits which are a sign of future projects most likely dropped to a record lows as well.

According to estimates, housing starts fell 2.7 % last month (December) to an annual rate of 605,000 which would be the lowest level since the Commerce Department started compiling data in 1959.

The actual housing-starts report for December is due out on January 22 but signs are that construction of new homes fell 21% in November to a 625,000 annual rate.

After seeing their shares lose over 76% of their value over the last three years, builders are slashing prices to try and compete with the record number of foreclosed properties coming onto the market and those close to Obama say he will inject around $100 billion in financial-rescue funds in an attempt to ease the mortgage crisis.

Delinquency filings are said to have risen by 41% in December from a year earlier and starts and home values in twenty major U.S. cities declined 18% in October which is the fastest rate on record.

Falling house prices make it harder for owners to sell their properties and buy new houses and the combination of slumping prices and rising foreclosures is dragging down optimism among construction companies and even record-low mortgage rates have failed to spur a turnaround in the market.

The average U.S. rate on a 30-year fixed mortgage fell to 4.96 % which is the first time it’s ever been below 5%.

Not a bright picture and the number of Americans filing first-time claims for jobless benefits probably rose to 543,000 last week from 524,000 a week earlier.

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