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US Home Construction Declines


US Home Construction Declines
Photo credit: ArmchairBuilder.com / Flickr

Economists routinely point to the construction industry and home sales for indications on the health of the economy. Data from within this industry reveals much about consumer confidence, buying power, and investor activity within the financial sector.

Predictably, home sales tend to plummet in the winter and construction levels sink, but the end of 2013 brought some worrying declines regarding construction activity.

Several months of declining construction activity and permit applications suggest that the recovery isn’t progressing as swiftly as hoped. Data collected as of March 2014 by the United States Census Bureau suggests that privately-owned housing starts for February came in at 6.4% below numbers recorded at the same time in 2013. However, it’s difficult to gauge the health of the economy on one number alone.

Double-Digit Growth Over

Immediately after the recession, new home starts came to a standstill, sales plummeted, and the construction industry laid off millions of workers. 2012 saw a reversal of fortune for construction companies and the real estate business as double-digit growth in home sales and market activity fueled the nation’s economic recovery.

That momentum weakened near the end of 2013 as housing starts took a huge tumble at the beginning of 2014. Unfortunately, activity in January was lower than at any time in the past three years. Vocal economists immediately took to the airwaves to declare the recovery over.

Optimistic economists, on the other hand, haven’t bought into the doomsday proclamations, and some experts have suggested that the arrival of spring should see construction activity resume. Indeed, new building permits saw improvement in February and beat estimates from January which may mean construction companies are looking ahead to the rest of the year for increased building activity.

Winter Freeze Slows Activity

Many industries saw declines because of the extended winter weather. Construction definitely hit a skid during 2013 and 2014’s record-breaking storms and snow. Activity in the Midwest was particularly hard-hit as residents in the middle of the country found it necessary to stay inside for months during huge snowstorms and erratic weather.

Recent statistics provided by the National Association of Realtors suggested that numbers through February showed eight months of declines in pending home sales. Investors and realtors hope that the sustained declines could be blamed upon the winter weather and that the spring will help stalled real estate transactions gain closure.

Home Sales Present a Cluttered Picture

Taking into account seasonal changes, real estate activity for existing and new homes paint a positive, but not incredibly buoyant picture of the housing market. New home sales saw sustained and positive activity over the winter while sales of existing homes sunk to a level not seen since the summer of 2012.

Most facets of the economy show positive growth and consumer sentiment is improved, but the economy is still in a fragile place, especially because of the long, cold, and expensive winter. Snowstorms after the first day of spring, threats of budget showdowns in Congress, and the prospect of increased mortgage rates may all weigh heavily on how the economy and home construction activity fare for the rest of 2014.

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