June 16, 2010
Housing Starts And Building Permits Down For MayAs should have been expected, in my mind anyway, housing starts and building permits both declined for May, 2010. With the expiration of the $8,000 federal tax credit for new home buyers (and the $6,500 federal tax credit for those “moving up or down”), it seemed logical to me that the real estate markets across the country would need time to readjust. So, for May construction of new single family homes fell 17% from April, and applications for new permits were down 5.9%. I know that in a typical recovery the construction industry is a major participant (if not leader); however given the depth of the housing industries struggles, I can’t believe anyone expected that to be the case this time. On the other hand, it appears that the real estate market is showing positive signs by reducing excess inventory (and even rapidly absorbing foreclosures and short sales). Prices have stabilized, and in the Evergreen and Conifer area even showing some improvement. In fact it seems that throughout the Denver metro area, and almost all of its surrounding areas (including Evergreen and Conifer), there is heavy demand for homes under $250,000, and decent demand for homes from $250,000 to $500,000. The more expensive homes are still selling slowly, but with the interest rate on jumbo loans finally declining to the normal spread from conventional loans, I think we may see that segment of the real estate market improve soon.
On a positive note, the Labor Department announced that wholesale prices dropped 0.3% in May, with energy prices falling 1.5% and food costs falling 0.6%. With inflation apparently well under control the Fed should be able to keep interest rates low; which in turn should help to keep mortgage rates low (a 30 year fixed rate mortgage is at about only 4 ¾%), and as such make housing more affordable and attractive.
As a final note, new construction has not been a major part of the Evergreen real estate market, and to a somewhat lesser degree the Conifer real estate market. So I don’t see these new numbers negatively affecting our real estate market; and perhaps with less completion from new homes in other areas, may even positively affect the Evergreen and Conifer real estate resale markets.
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