« Wednesday Linkage Commuting from the Burg: Can't Get L From Here »

April 19, 2006

Housing Starts Lowest Since March 2005

April 18, 2006 -- Builders started work last month on the smallest number of new houses in a year, as rising mortgage rates and record inventories of unsold homes discouraged new projects. Housing starts declined 7.8 percent in March to an annual rate of 1.96 million, from 2.126 million in February, the Commerce Department said today in Washington. Building permits, a sign of future construction, fell 5.5 percent to an annual rate of 2.059 million from 2.179 million. "It's clear that the housing market is cooling," Joel Naroff, president of Naroff Economic Advisors, in Holland, Pennsylvania, said before the report. "There are areas of the country where we are going to see pretty sharp declines in construction and in housing prices."
U.S. Housing Starts Fall 7.8% in March [Bloomberg]




Posted by Brownstoner at 8:55 AM | Comments (20)
Categories: Market

Comments

Don't know how much of an immediate effect this will have on NY, but certain areas are showing bad signs of wear - CA, FL, AZ - as expected.

Posted by: Anonymous at April 19, 2006 9:03 AM

I think it will be good to see gradual declines in housing starts. We all know that things can't continue at the pace they have, if it slows at a reasonable pace it means that the supply coming on line is getting in synch with the demand. What we need to watch for is a sharp drop-off which will signal that the supply has gone too far.

The other interesting point is the multi-family starts were up considerably. Not sure if this includes buildings slated for condos or not but it does show that demand greater then supply in some segments of the market. All the condo conversions are beginning to sqeeze the rental market, manhattan rental prices are up almost 10% over last year.

Posted by: Anonymous at April 19, 2006 9:14 AM

Thanks for that info anon 09:14 AM. It's interesting how often these reports tend to lump all real estate together. It's good to recognize that the market has different stratas (regional, price, house vs. coop vs. condo, 2-bedroom vs 1 bedroom vs studios, etc). Not all sectors are affected similarly. Some sectors continue to experience growth while others decline or stabilize.

I'm actually heartened by the fact that developers seem to be learning their lesson from the late 80's, early 90's market crash. They seem to be responsibly adjusting housing starts to compensate for increases in supply.

The problem with the late 80's was that developers kept building more new houses/condos even as the inventory continued to increase. This lead to a glut and an eventual crash in property values.

Posted by: nutcase at April 19, 2006 10:36 AM

That's it! Sell, sell, sell....

Posted by: Anonymous at April 19, 2006 10:57 AM

"The problem with the late 80's was that developers kept building more new houses/condos even as the inventory continued to increase. This lead to a glut and an eventual crash in property values."

But they've only fallen 5%, which means they are still building. Just because they're slowing a bit doesn't mean they're stopping, so we could easily see a glut. Plus, it doesn't account for everything currently under construction and not sold yet, and we all know that there are plenty of buildings out there like this (ie, Toll's new East Village building). It would seem that at least for this year, inventory is still going to keep rising.

Posted by: Anonymous at April 19, 2006 11:10 AM

Anon 11:23 AM, I think that is exactly what's exciting about living in bklyn today. You never know what's going to jump off week to week. I live near Myrtle 'murder' ave and it's amazing watching buildings getting torn down, new buildings going up, new restaurants, cafes, stores, etc. opening. It's continually evolving. Boggles the mind. I constantly have to adjust my thinking/expectations. Just when you thought you saw it all, something else bigger and grander comes along.

I drove along 4th ave also recently and was amazed at all the activity going on near atlantic ave. It seemed as if every block was spoken for.

Will there be a glut eventually. Probably. But the downtown area is getting so 'beautified' that I think people will continue to make the move across the bridge(s) for years to come.

Posted by: nutcase at April 19, 2006 11:38 AM

I sense more FSBO's. Seems like a bear indicator as sellers have to get more stingy with their profit margins as opposed to months ago. No?

Posted by: Anonymous at April 19, 2006 11:59 AM

Anon 11.59am, I don't know. If it was a strong seller's market, you could say doing a FSBO would be a no brainer too because the property would sell itself and not need the help of a broker. Hard to say. All I know is that when I was looking a few years ago, I scoured everything and did not just rely on brokers. Seemed like everyone else was doing the same thing then too (at least for townhouses). Makes me question the real value of brokers for townhouse sales generally in desirable areas.

Posted by: Anonymous at April 19, 2006 12:29 PM

FSBO may be no brainer like doing your own laundry. However, it can be thought of as a luxury (like dropping off your laundry) that some sellers, faced with stagnant price appreciation, can no longer afford if they want to see a profit.

Posted by: Anonymous at April 19, 2006 12:46 PM

Yeah, the commissions (rental and sales) are outrageous. I used to be a serial mover back in 2000, before I moved back to nyc. But the 10-15% annual rental commission that the agents were charging in nyc helped me to quickly cure a bad habit. Good thing I'm a cheap-skate. It forced me to take a good, long, hard look at homeownership and I haven't looked back ever since.

Nowadays, everybody and their mom is a real estate agent. I took the course and got licensed in order to educate myself about the market. But I've since let it expire and can't imagine relying on a sales license for a living. It's a good time to be an agent (if you're a good salesperson) but I can see it quickly becoming a very precarious profession over the next few years.

Posted by: Anonymous at April 19, 2006 1:09 PM

I second 12:29 regarding brokers and townhouses. And in Brownstone Brooklyn, with no multiple listing service, any serious buyer is forced to deal with many, many (sometimes awful) brokers; one doesn't have the luxury of NOT looking at the NY Times or even Craiglist regularly. So they will likely see FSBO listings and pursue them if interested.

Posted by: ConsideringFSBOsale at April 19, 2006 1:25 PM

Coming from Florida things are starting to look really bad, do not get involved investing down there for a while people are in over there heads big time.

Posted by: Anonymous at April 19, 2006 1:56 PM

I almost bought a ocean-front condo in aventura (ft. lauderdale) last year. Was high up on the 'waiting' list for a pre-condo conversion. But found out a day before the 'open house' that the waiting list was no longer valid and that it was a free for all. People were camping out overnight to get in on the 'deal'. I sort of reminded me of the conversion deals in nyc. The apts. were spectacular but I'm glad that I got turned off and walked away.

I had a basic problem reconciling the price of the apts with the local economy. None of it made sense. Sure, there was a lot of 'celebrity' buyers looking to invest in a vacation home, and there were a lot of 'south american'/international buyers but I still had an uneasy feeling about the glut of condo's that were being developed.

I just didn't get the sense that the 'locals' could support the prices in the market. Sure there's a large financial district in miami but nothing compared to nyc. I think the difference between florida and nyc is that the 'locals' can support the current market.

Posted by: nutcase at April 19, 2006 2:12 PM

Anon 01:56 PM, just curious, how bad is it in florida

Posted by: nutcase at April 19, 2006 2:14 PM

Old trading adage: "sell when you can, not when you have to." Though real estate values do not fall out of bed like stock prices, it's still holds true...

Posted by: BrownBomber at April 19, 2006 2:54 PM

Hey brownstoner, what happened to Anon 11:23 AM's post? Either I'm hallucinating again or yer making me out to be the nut that I really am :]

Posted by: Anonymous at April 19, 2006 4:13 PM

that's okay...needed to get back to work anyway

Posted by: Anonymous at April 19, 2006 4:21 PM

"I just didn't get the sense that the 'locals' could support the prices in the market. Sure there's a large financial district in miami but nothing compared to nyc. I think the difference between florida and nyc is that the 'locals' can support the current market."

I am not from Florida but have read that it's really bad down there now.

I disagree, though, that the locals can support this market here. That assumes that most people in NYC can afford something over 700K (and I'm saying "afford" as in "don't have to leverage their lives to the hilt" to do it). I'm not arguing that there's not a lot of money here, but really, not everyone is that well off. This market may not be quite the level of crazy of Florida, but it doesn't seem to me to be as justified as you think. For example, since it's discussed a lot here, would most people be able to afford a brownstone if they didn't have any rental income? Or buy a new condo with a regular old 15 or 30 year loan? I don't know but I just don't think NY is as flush with real cash as everyone assumes.

Posted by: Anonymous at April 19, 2006 6:09 PM

2:54,

Absolute real estate values may not fall out of bed like stock prices but after subracting holding costs like maintenance, utilities, annual taxes, etc. that you don't have with stocks, your net gain can.

Posted by: Anonymous at April 19, 2006 7:27 PM

Great article! Mortgage. Find best mortgage rate and mortgage calculator.

Posted by: Mortgage broker at June 15, 2006 10:30 AM

Post a comment

Please be patient while your comment is published. It may take a moment.

Latest Restaurant Additions