New House Construction Sales Continue Its Decline; Shares Still Holding

There is currently a lot of suffering new home builders across the country. As the US continue to suffer from an economic crisis, the housing industry continues to turn bad, and one of the most affected areas are those involved in new house construction.

There are fewer and fewer houses to build because people are not interested in investing their money anymore.

Just this Wednesday, home builders got another hard blow. This is because there has been a sharp decline in the sales of new houses, an unexpected event that even experts did not see coming. This event shows that the sector should continue to search for more stable means as it barely survives the economic crisis.

The Commerce Department said that sales of single-family houses fell by 0.6 percent. This is way below the expectation of economists, proving that the new house construction market has indeed fallen again.

According to Leif Thomas, Mortgage Master’s chief executive, the statistics and the recently released date made them sad, since they are really not great.

However, these results did not drag down the shares of home builders. They even opened with some gains as they were aided by a report released by the Mortgage Bankers Association. Mortgage applications last week rose by around 6.6 percent based on seasonal adjustments, and even increase by 17 percent a year ago. All major construction companies recently had gains, with LEN or Lennar’s on the lead. The Dow Jones US New House Construction Index also climbed recently by 2.34 percent.

This is really good news for the home construction industry, as it had continued to suffer the effects of the economic crisis. Foreclosed houses continue to attract buyers since they are more affordable than buying a new house. The $8,000 worth of tax credit for first tome home buyers was expected to help the industry, but there was not much good news. Also, the interest rates are again gradually increasing, and this is a cause of worry for the construction companies.

There is also a newly enacted guideline for appraisal that some people would think as too stringent. This could mean that a lot of orders that were signed in the past months may not result to closings. This was according to Dann Oppenheim, Credit Suisse analyst. He further adds that there can be more decreases in new home sales, giving more worries to those in the new house construction business.

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