The Department of Commerce said Wednesday morning construction permits fell to a ten-year low of 1.429 million. The 8.9% drop was the most severe in 17 years, and was well below the seasonally adjusted rate of 1.51 million forecasted by economists. Conversely, housing starts were unexpectedly up 2.5% to a seasonally adjusted annual rate of 1.528 million, ahead the 1.48 million pace forecasted. Over the past year, permits have dropped 28%, while starts are down 16%. Economists say buyers are delaying buying homes in anticipation further price drops, while stricter lending rules mean less people are able to finance purchases. Housing weakness is still the biggest threat to Federal Reserve forecasts of "moderate economic growth." On Tuesday, the National Association of Home Builders reported that homebuilder sentiment dropped unexpectedly in May on increasing order cancellations.
Sources: Press release (.pdf), MarketWatch, Bloomberg, Reuters
Commentary: Median House Prices and Homebuilder Confidence Decline • Banks Face Growing Pressure on Home Prices • Sub-Prime Woes Not Spilling Over To Over Other Credit Areas
Stocks/ETFs to watch: Toll Brothers Inc. (NYSE:TOL), KB Home (NYSE:KBH), Lennar Corp. (NYSE:LEN), Beazer Homes USA Inc. (NYSE:BZH), Centex Corp. (CTX), Pulte Homes Inc. (NYSE:PHM). ETFs: streetTRACKS SPDR Homebuilders ETF (NYSEARCA:XHB), iShares Dow Jones US Home Construction (NYSEARCA:ITB), PowerShares Dynamic Building & Construction (NYSEARCA:PKB)
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