Drop in Housing Permits One of the Biggest on Record

Published May 22, 2007 | RSS Feed

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If you want proof that the housing market is still in a slump, you don't need to look much further than the number of housing permits taken out in the month of April. There was an 8.9 percent decline in new construction permits-the sharpest drop since the housing downturn of 1990.

There are a lot of news headlines out there boasting about an increase in home building during the month of April. What the headlines don't mention is that the month over month gain was ridiculously small-2.5 percent.

The headlines also neglect to mention that while new home construction was up slightly in April compared to March, it is down a whopping 25.9 percent in a year over year comparison.

Even more telling perhaps is the coming slowdown in new construction. Builders took out 8.9 percent fewer permits during the month of April. This is the biggest decline in permits seen in 17 years, and the best indicator of what is still to come in the housing market.

'The drop in permits is one of the biggest on record. It suggests the contraction is housing is not over and has some months to play out,' confirms Bill Hampel, chief economist for the Credit Union National Association.

The drop also illustrates the level of builder confidence, which according to a recent survey by the National Association of Home Builders, is at an all time low.

David Seiders, chief economist for the NAHB is now forecasting a 22 percent decline in housing starts this year, expecting things to stabilize and improve sometime in 2008.

Of course, Seiders predicted last year that things would improve in the spring of 2007-a prediction that did not come true. With unsold home inventory building rather than dwindling, Seiders' latest forecast could be considered hopeful at best.

The NAHB estimates there is in excess of 1.4 million homes just sitting on the market in the U.S. waiting to be sold. According to the Commerce Department, the number of vacant unsold units available nationwide in the first quarter of this year is at an all time high.

The pile up of inventory even prompted the National Association of Realtors-the most optimistic entity in the real estate world-to recently revise its housing forecast. The NAR is now predicting that existing home prices will fall this year for 'the first time since the Great Depression'.

If you have been paying attention to the housing market at all, you may be wondering where the NAR has been. Home prices fell in 38 out of the 50 states in 2006. If it happens again this year, it certainly won't be the first time.

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