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If the home builders are nervous, what does that mean for the rest of us?

Posted by: Prashant Gopal on November 19, 2008

The builders are about as pessimistic as they’ve ever been. Yesterday, we learned that the National Association of Home Builders/Wells Fargo Housing Market Index, which tracks builder sentiment, fell to a record low of 9 in November (sinking from an already low 14 in October).

Today we found out that housing starts fell 4.5% in October and even more concerning, single-family home building permits plummeted 14.5%, meaning that we’ll see an even more significant drop in housing starts in coming months.

Patrick Newport, U.S. Economist with IHS Global Insight, seemed downright worried when I spoke with him today. He called the housing start report, a “shocker.”

“These are people who know their business,” Newport said of the builders. “They’re in better touch with the market than we are and the press is.”

The financial crisis, which really got going after Lehman Brothers collapsed on Sept. 15, will likely cause serious damage to the already faltering housing market. It seems that mortgage applications are way down since September, an indication of falling buyer demand.

U.S. home mortgage applications dropped last week by a seasonally adjusted 6.2% compared to the previous week, according to the Mortgage Bankers Association. And the application volume was down 41.3% compared to the same week in 2007.

Reader Comments


November 20, 2008 12:13 PM

Good News - no more new homes flooding an over crowded market. Now the market can clear out inventory and begin healing.


November 20, 2008 3:00 PM

Pete is absolutely correct.

No more new builds should prop up existing housing values, help sales of existing housing stock and get rid of the housing glut.

And in those areas not a housing glut, should see some nice inflationary price increases.

If the economy is so scary, then why arent we closing the borders and revoking green cards and visas?

Home builder

November 20, 2008 7:01 PM

I think that a lot of the problems we are currently seeing in the housing market stem from consumer fear. Once we get some confidence back into our customers and home buyers we will see a turn around in the housing market.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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