For the second year in a row, residential housing construction failed to contribute to growth in the US. The demand for building permits fell, new home construction starts are down, and the foreclosure pipeline is as full as ever. As a result, banks are keeping a tight fist on mortgage lending standards. There are four main indicators that we can look to and determine that we’re still in a pretty significant housing slump:
- Fewer New Home Permits – Last month, there number of new homes under construction was at the lowest rate since 1970. Single-family home construction fell by nearly 5%, whereas apartments and townhouses rose by nearly 8%.
- Falling Demand – Increasing foreclosures are keeping real estate values down. As a result, builders have little incentive to put up more houses in an already flooded market.
- Strict Credit Standards - Getting a mortgage for the average homeowner remains tough. One of the reasons, according to the banks themselves, is there is “reduced or unchanged demand from creditworthy borrowers.”
- Weak Stock Futures – Uncertainty in overseas markets have economists nervous, especially following the recent S&P credit downgrade. The Treasury’s 10-year note fell to 2.27%, from 2.31%. The import index was down .3% in June.
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