Low confidence in US real estate market
Real estate brokers and agents in the US are feeling negative about the outlook for the property market despite tentative signs of improvement.
The US Real Estate Confidence Index fell by 8.42% in September to reach its lowest level since Vancouver based Point2 began to track future expectations in June 2009.
Sentiment over current market conditions dropped to 3.94 on the scale, down 9.43% over last month and 22% over the same period a year ago. The short-term outlook (three to six months), hit a new low, settling at 4.2, down nearly 10% over last month and 26% compared to September 2009.
While the long term outlook (six to 12 months) dropped for the third consecutive month and recorded a new low of 5.24.
However, in another sign of possible easing in the troubled real estate market, construction of new homes rose 0.3% last month from August topping analysts’ estimates of a decline and reaching the highest level since April.
Housing starts in September climbed to a seasonally adjusted 610,000 units from an upwardly revised 608,000 the prior month, according to figures from the Commerce Department.
Also figures from McGraw Hill Construction indicate that residential building increased 6% in September to a seasonally adjusted annual rate of $116.7 billion.
The situation though is still fragile, analysts are warning. ‘Weak demand and chronic excess supply means homebuilding activity will remain subdued for a few years yet,’ said Paul Dales, US economist at Capital Economics.
The rate of housing starts is now 13% higher than June, which represented the nadir since the ending of the homebuyer tax credit, and 28% higher than the record low of April 2009.
‘The key point is that starts are still incredibly low by historical standards. They are still an eye-watering 75% below 2006’s peak and 40% below the one million mark that is broadly consistent with the rate of household formation and the replacement rate of existing stock. We doubt that housing starts will reach a million before 2015,’ explained Dales.
Permits for new construction, a leading indicator of future building activity, fell about 5.6% last month to 539,000 from a revised 571,000 for August. The September figure is nearly 11% lower than 605,000 a year ago.
‘Overall, residential investment will not be able to drag the US economy out of its current malaise. At least the news that some banks have resumed foreclosure activity means that the housing recovery won’t be stretched out over more years than already looked likely,’ added Dales.