The result was worse than expected. TD Economics reported a 2.3% decline had been expected by economists. In another down sign for the U.S. market, the National Association of Home Builders (NAHB) reported this week that its index of builder sentiment in September slid from 15 to 14. Any reading below 50 indicates a negative sentiment, and the index has been below 20 for all but one month in the past two years.
“At this point, most builders are only looking to replenish their depleted inventories of new homes for sale, but otherwise holding off on new projects,” said NAHB Chairman Bob Nielsen. “While we would like to get more crews back on the job, we need to see solid improvement in consumer demand, greater access to credit for both builders and buyers, and a reduction in the number of foreclosed properties on the market before we can ramp up new production.”
One positive indicator for builders is that building permits rose 3.2% to a seasonally adjusted rate of 620,000 units in August, the highest level in eight months.
Economist Alistair Bentley of TD Economics said there is no indication that Hurricane Irene played a part in the results.
“Regardless of the storm, housing construction remains at historically low levels,” he said. “By restricting the supply of new housing, weak building activity should speed up the pace at which foreclosure inventory is absorbed.”
Bentley added he expects multifamily construction to outperform single family construction for the next two or three years as demand from renters remains strong across the country. New homeowners remain reluctant to jump in the market yet and take on mortgage debt with continued economic uncertainty, he said.
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