Unemployment Rate, Other Indicators Point to Dismal Forecast for Housing Starts in 2009
- Jan 22, 2009
By Anuradha Kher, Online News EditorWashington, D.C.–According to the U.S. Census Bureau and the Department of Housing and Urban Development, new-home construction starts for multifamily (five units or more) fell 17.1 percent to 145,000 from November to December 2008. Meanwhile, the overall starts fell 15.5 percent for the same time period, to an annual pace of 550,000, the slowest on record. Homebuilders have all but shut down projects as home values plunge and potential buyers stay on the sidelines. “It’s going to be very difficult in 2009 for developers to get financing for any kind of project,” Toby Bozzuto, president of Bozutto Development Company, tells MHN. “FHA-funded projects, some tax credit projects and publicly funded projects will start in 2009, but any project that relies on the capital markets for financing, can forget about it.”In a previous interview with MHN, David Jacobstein, chief advisor to Deloitte LLP’s Real Estate Practice, said, “New mixed-use developments are dead for now.” Click here to read the whole story.The pace of new-home construction in December was 45 percent below its levels from a year ago. For all of 2008, the government estimated that 904,300 housing units were started, a drop of 33 percent from 2007. “What you’re seeing is capitulation by home builders,” John Lonski, chief economist at Moody’s Capital Markets tells the New York Times. “The news you got today reinforces the view that stabilization of housing starts is well off into the future.”The nationwide unemployment rate has risen to 7.2 percent, and according to several forecasts, including Freddie Mac’s Economic and Housing Market Outlook, this number could climb as high as 8.7 percent by the end of 2009. This, and other gloomy key indicators, will have a negative impact on housing starts until the end of 2009. According to the Economic and Housing Market Oulook, housing starts in the first quarter of 2009 will be 62,000 as compared to just over a million for the same period in 2008. Starts are also forecast to remain the same in the second quarter of 2009, rising feebly to 70,000 and 75,000 in the third and fourth quarters respectively.