Home Construction Picks Up as Foreclosures Drop in November
After quite some time, construction of new homes rose in November. According to data released by the US Commerce Department, annualized rate of new home constructions increased by 3.9% in the month to 555,000 units compared to new home constructions in October.
The number of new home constructions in November is still dwarfed by the number during the construction boom in 2005, which was more than 2 million new homes. However, the rate was 16% higher compared to the all-time low of just 477,000 units in April 2009.
Some analysts warned that there are indications that the home construction sector is yet to reach its bottom. They expect new home constructions to remain low or even drop in the coming months as foreclosure activities start to pick up. They added that abundance of home inventory across the market would push new constructions down. About a million foreclosed homes are expected to be sold across the market from last year to this year.
The volume of foreclosed homes dropped by 28% in November compared to foreclosures in October. Analysts assert that the significant decline is logically because of mortgage lenders’ decision to temporarily halt their respective foreclosure activities. Such a decision was prompted by allegations from numerous homeowners that the mortgage industry mishandles foreclosures just to speed up evictions even without proper and legal review of documents.
Just 67,428 foreclosed homes were actually repossessed by mortgage providers and servicers in November. Analysts said this is among the lowest level for foreclosures since May 2009. They asserted that even with the steep decline, the total volume of repossessed foreclosed homes last year would still be high – about 980,000 – the highest annual volume since 2005.
Meanwhile, construction activities in November were mostly single-family houses. Such constructions rose 6.9% from October. Construction of apartments dropped 9.1% to 90,000 units. Housing permits, considered an indicator of demand in the future, decreased 4% to 530,000. This, according to analysts, still reflects the current weakness of apartment construction.
When the volume of foreclosed homes pick up in the coming months, home prices are expected to drop again.
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