New home construction shows modest increase in July; Numbers for 2009 still way below 2008

This morning the US Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for July 2009 showing a slight increase in new home construction activity from June.

The report shows the following:

• Building permits issued for single-family residences in July were at an annual rate of 458,000 which is a 5.8% increase over June, but still 20.3% below July 2008.
  • The West region had the largest one month increase at 6.9%, followed by the South at 5.6% the Midwest at 5.5% and finally the Northeast at 4.9%.
• Housing starts for single-family residences in July were at an annual rate of 490,000 which is a 1.7% increase over June but is 22.5% below July 2008.
  • The Northeast had the largest one month increase in starts at 14.0%, followed by the West at 1.9%, the South at 0.8%.  The Midwest  had a decrease in starts for July from June by 3.4%.
• Single-family homes completed in July were at a rate of 491,000 which is a drop of 4.1% from June.

Something to remember is all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for July 2009 versus July 2008.  Another way to take a look at where things stand would simply be the year to date data, actual numbers and not seasonally adjusted, compared to last years ytd numbers at this same time.  I think this may give a little better comparison so those numbers are below:

• Through July 2009 there have been 248,900 permits issued for new homes compared with 387,400 this time last year for a decline of over 35%.
• Through July 2009 there have been 250,400 new homes started compared with 415,700 this time last year for a decline of 39.8%.
• There have been 285,400 new homes completed through July 2009, compared with 479,500 this time last year for a decline of 40.5%

So, while the current trend, based upon seasonally adjusted numbers is upward, as you can see the new home market so far this year is way off from last year and last year was not good.  Having said this, even though I feel for everyone affected by the downturn in construction, from the standpoint of the real estate market, I think this is necessary.  We have an excessive inventory of new and existing homes on the market so there is no point adding to it substantially at this point.  We need to let the sales numbers continue to increase, get the foreclosure rate out of high gear and let the inventory fall to a number that is more appropriate for the market demand.  Then, and only then, do I think we want to see significant increases in new home construction.

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