The number of new homes being built in the U.S. is at its lowest point in over 50 years since statistics to this effect started being tracked in 1959. This is certainly keeping a lid on overall economic activity, since home building has historically been a major part of the U.S. economy.
The actual number of ground breakings for 2010 was about 586,000, which was better than the worst year on record, 2009. In that year there were 554,000 new homes constructed in the U.S. One might think an improvement of about 6% is not bad, but these figures are only about one-third of what is considered normal new home construction rates, so the recovery has a long way to go.
Historically low interest rates and low home prices have not spurred significant home buying, so one has to look elsewhere to see where improvement might come. Certainly the answer lies in the jobs market. In order for home sales to pick up significantly people will need to feel comfortable enough about their job prospects to make a large financial commitment like a home purchase.
The huge number of foreclosed homes on the market is acting like an anchor holding the level of new home construction down. These homes have lower average prices, and those prices are difficult to compete with for new home builders. And with the overall supply of unsold homes very high, why should builders sink money into even more supply that will most likely sit vacant for some time?
In fact the number of foreclosed homes in the U.S. in 2010 was about one million, and the figure for 2011 is forecasted to be 1.2 million. In general people understand the pain involved in being a foreclosure statistic, and they will avoid this kind of risk if they must. Increased consumer confidence will help some get over the hurdle, but that will take much higher job growth and a much better overall economic outlook.
Home sales have been affected by several other factors as well. The large number of foreclosed homes on the market continues to hold down prices, and some real estate experts predict lower selling prices on average in 2011. On the other hand, interest rates have been creeping up in recent months, despite all the efforts of the federal government to hold them down as low as possible. If this trend of higher interest rates continues, people who are holding out on buying a home might take the plunge for fear of missing out on interest rates that are near 50 year lows.
The actual number of ground breakings for 2010 was about 586,000, which was better than the worst year on record, 2009. In that year there were 554,000 new homes constructed in the U.S. One might think an improvement of about 6% is not bad, but these figures are only about one-third of what is considered normal new home construction rates, so the recovery has a long way to go.
Historically low interest rates and low home prices have not spurred significant home buying, so one has to look elsewhere to see where improvement might come. Certainly the answer lies in the jobs market. In order for home sales to pick up significantly people will need to feel comfortable enough about their job prospects to make a large financial commitment like a home purchase.
The huge number of foreclosed homes on the market is acting like an anchor holding the level of new home construction down. These homes have lower average prices, and those prices are difficult to compete with for new home builders. And with the overall supply of unsold homes very high, why should builders sink money into even more supply that will most likely sit vacant for some time?
In fact the number of foreclosed homes in the U.S. in 2010 was about one million, and the figure for 2011 is forecasted to be 1.2 million. In general people understand the pain involved in being a foreclosure statistic, and they will avoid this kind of risk if they must. Increased consumer confidence will help some get over the hurdle, but that will take much higher job growth and a much better overall economic outlook.
Home sales have been affected by several other factors as well. The large number of foreclosed homes on the market continues to hold down prices, and some real estate experts predict lower selling prices on average in 2011. On the other hand, interest rates have been creeping up in recent months, despite all the efforts of the federal government to hold them down as low as possible. If this trend of higher interest rates continues, people who are holding out on buying a home might take the plunge for fear of missing out on interest rates that are near 50 year lows.
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