From the AP:
Housing construction is crawling out of its very deep hole, but no one expects it to reach the heights hit before the housing bubble burst — at least not for a very long time.
The Commerce Department released its monthly report on housing starts Tuesday, saying they increased in September by a modest 0.5 percent to an annual rate of 590,000 new homes and apartments. Applications for new building permits, however, fell by 1.2 percent to an annual rate of 573,000 units.
Here are some questions and answers about the housing starts report and what it says about the state of housing and the overall economy.
Q: What has been happening to housing starts?
A: They have been on a wild roller-coaster ride.
They surged into the stratosphere during the housing boom in the middle of the decade as cheap credit propelled sales of both new and existing homes to record levels for five straight years. To meet demand, builders ramped up production, pushing construction starts to 2.07 million units in 2005, close to the all-time high for housing starts of 2.36 million new homes and apartments constructed in 1972.
Q: What happened after 2005?
A: Housing has been in a painful, prolonged slump. Housing starts hit an all-time low this past April of 479,000 units at an annual rate, 79 percent below the peak month during the boom years. Since April, however, housing construction has staged a modest rebound, rising in four of the past five months, including the 0.5 percent gain in September that was reported Tuesday.
Q: So is that good?
A: Well it is certainly better than the plunge in construction that occurred over the past 3 1/2 years. The downturn in housing, accompanied by rising mortgage defaults, helped trigger the worst financial meltdown since the Great Depression and pushed the country into its longest recession in seven decades.
A rebound in housing is needed to help support overall economic growth — both directly, through the money spent to build new homes, and indirectly, through the support increases in home sales provide to related industries such as appliance makers and furniture stores.
Q: What do economists expect will happen in coming months?
A: The September housing starts report gave some mixed signals. Housing starts did rise but the report showed that permits for new construction fell for the second month out of the past three. And analysts closely follow building permits as a good indication of future activity.
Analysts suspect that the September permit decline was a payback from a jump in applications earlier in the summer, as builders rushed to get projects started in time to take advantage of the government’s $8,000 tax credit for first-time homebuyers. That program is scheduled to end Nov. 30.