Notes from Jim HaugheyReed Construction Data Chief Economist Jim Haughey discusses how current developments in construction markets and the ecomony will bring opportunities and challenges for designers, contractors, and materials and services providers. His reports will cover near-term building demand, cost and financing changes, and will provide early notice on changes in the detailed two-year construction forecasts elsewhere on this site. Feedback and questions from readers are encouraged. RSS FeedRecent Posts
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BlogThursday, October 4, 2007September Was an Ugly Month in the Housing MarketOct 4 2007 6:44AM | Permalink | Email this | Comments (0) | Expect ugly housing market reports for September when the data begin to appear in a few weeks. The peak impact of the collapse of the residential sub-prime and jumbo mortgage markets will hit in September. Weak September reports are expected for permits, starts, home sales, home inventories and home prices. The negative impact from the mortgage markets will linger for several more months but will be progressively less significant after September. The September reports you see in a few weeks are trailing data. Mortgage market conditions have already improved — but not back to the pre-crisis level of last July. Nonetheless, Reed Construction Data expects housing activity to recover slightly in the fall from the depressed August/September level. For example, the August drop in housing starts was primarily in the Northeast and West where jumbo mortgages are the most common. Lots of home sales and hence starts were cancelled or postponed when prospective homebuyers could not get jumbo mortgages on the terms they expected. Some mortgage brokers lost their access to funding sources. And even if the broker could deliver the loan amount it was often at a higher interest rate. Tougher approval standards and higher down-payment requirements also eliminated some prospective buyers. Jumbo mortgage rates jumped to 7.2% in mid-August from 6.6% at the end of July but have since fallen back to 6.9% and access to credit by mortgage brokers has improved. Some of the deals that did not happen in August and September will be revived in October and beyond, providing a small boost to the housing market in the fall. The bounce back of the market for expensive homes in the fall is not the beginning of the housing recovery. The market will remain at the bottom of the cycle for a few more months. The sustained recovery will not begin until the surplus inventory and falling home prices in the existing home market begin to ebb significantly. Reader CommentsPost a comment |
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