New home construction dropped sharply in December 2008

Construction of new homes fell significantly in December 2008 and a decrease in permits for future projects signals continued decline, according to The Wall Street Journal. Additionally, homebuilder confidence has reached a historic low and home prices are rapidly declining.

New single-family and multifamily home construction fell 15.5 percent from November 2008 to December 2008 to an annual rate of 550,000 units, moving at the slowest pace since monthly records began in 1959. The rate has fallen by almost half since December 2007.

The slow pace is a result of various factors, including a massive amount of unsold homes, new foreclosures and reduced home buying during difficult economic times.

Permits granted for residential construction, which gauge future homebuilding activity, dropped almost 11 percent in December 2008 to an annual rate of 615,000 permits. In addition, home prices have declined 10.5 percent through November 2008 from their peak in April 2007; prices experienced the largest monthly decrease yet with a 1.8 percent drop from October 2008 to November 2008, demonstrating that prices are declining more rapidly.

Date : 1/29/2009