Report: New Housing Construction Down
ROBERT SIEGEL, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
MICHELE NORRIS, host:
And I'm Michele Norris.
And we begin this hour with some troubling news on the housing market. The Commerce Department reported today that home builders broke ground on fewer new homes that analysts expected. Housing starts were down 10.6 percent from a month earlier. In fact, home building is down around its lowest level in more than six decades.
And NPR's Chris Arnold has been following the housing market throughout the downturn and he now has this report.
CHRIS ARNOLD: It's no surprise that the housing market is slumping, but it's actually pretty remarkable when you look at just how few homes are right now getting built.
Dr. DAVID CROWE (Chief Economist and Senior Vice President, National Association of Homebuilders): The housing construction levels have dipped to the lowest on record, that we have any decent records, all the way back to the '40s, and lie pretty much at that same level right now.
ARNOLD: David Crowe is the chief economist of the National Association of Homebuilders.
Dr. CROWE: Although our population expanded four-fold since the '40s, we aren't building anymore new homes than we were in the '40s.
ARNOLD: That's pretty dramatic, and it's bad news for the whole economy. For one thing, it shows very weak demand from consumers or homebuyers. But also, at the end of most recessions housing tends to pick up and it usually gives the economy a boost.
Dr. CROWE: Homebuilders hire construction laborers, homebuilders buy appliances and carpets that were made in a plant somewhere else. And then the people that move into the house buy furniture and window coverings and plantings. And so there's a whole cycle of economic activity that usually stimulates the economy in a recovery that is not taking place on this cycle.
ARNOLD: That's because this recession was caused by excessive risk-taking in the housing market and the financial system and there's still a big hangover going on from that.
Steve Blitz is a senior economist at ITG Investment Research. He says homebuilders just built way too many houses during the bubble. He says the rule of thumb over the years was that building a million new homes a year in the U.S. pretty much matched demand, but during the housing bubble...
Mr. STEVE BLITZ (Investment Research Economist, ITG Investment Research): We were building two million homes a year.
ARNOLD: And that's a nice kind of basic math way to look at it. OK, normally we build a million homes a year, we were building two million. And for how many years were we doing that?
Mr. BLITZ: We really overbuilt really two much in the past decade. And you're right. This is just math.
ARNOLD: So, one of the biggest problems right now is that we just have millions of extra houses. Some are getting dumped back onto the market through foreclosures. You also have fewer people who are able to qualify for a loan to buy a house. But homebuilders are out there trying to rekindle the market.
One of them is KB Home, which is a big national homebuilder. We caught up the CEO, Jeff Metzger, earlier today at a new condo development.
Mr. JEFF METZGER (President and CEO, KB Home): I'm in West Los Angeles, Chris, at a community called Playa Vista, which is a...
ARNOLD: Metzger says his condos here are super environmentally friendly and he's hoping that saving 50 percent on utility bills, with better insulation and solar power will attract homebuyers to these green building projects that he's doing.
Mr. METZGER: We're trying to find ways to differentiate from the existing housing stock. And in an odd way we're making the homes we built five years ago obsolete.
ARNOLD: Still, most analysts do not expect overall home sales or construction nationwide to pick up much at all until the end of the year, and maybe at that. Metzger says the biggest help he thinks would to see the economy gain more jobs and for more Americans to feel more confident about buying a house.
Chris Arnold, NPR News, Boston.
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