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18 Reasons Why You Can Stick A Fork In The New Home Construction Industry

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If you make your living by building or selling new homes in the United States, you might want to consider taking up a different career for a while.  New homes sales in the United States hit yet another new all-time record low in the month of February, and there are a whole lot of reasons why new home sales are going to stay extremely low for an extended period of time.  The massive wave of foreclosures that we have seen has produced a giant glut of unsold homes in the marketplace, mortgage lenders are making it really hard to get approved for home loans, unemployment is still rampant and the global economy looks like it may soon plunge into another major recession.  None of those things is good news for the new home construction industry.  The truth is that we were supposed to have seen new home sales already bounce back by now.  If you look at the historical numbers, new home sales in the U.S. always increased significantly after the end of every recession since World War 2.  But that did not happen this time.  Instead, new home sales have just continued to decline.  This is absolutely unprecedented, and economists are puzzled.  So what is going to happen if the U.S. economy suffers another major downturn?

New home construction has always been one of the foundational pillars of the U.S. economy.  When times were good new home construction would boom, and when times were bad new home construction would falter.

Well, unfortunately the industry is stuck in the midst of a multi-year decline right now.  The reality is that you can stick a fork in the new home construction industry in the United States.  It is toast.  There is going to be no recovery for the foreseeable future.

Not that previously owned homes are doing that much better.  According to the National Association of Realtors, sales of previously existing homes in the United States dropped 9.6 percent in February.  But at least sales of previously owned homes are not at all-time record lows like new home sales are.

As you can see from the facts posted below, new home sales are absolutely abysmal right now, and there are a lot of indications that things may get even worse.  The following are 18 reasons why you can stick a fork in the new home construction industry….

#1 New home sales in the United States set a brand new all-time record low in the month of February.

#2 Only 19,000 new homes were sold in the United States during the month of February. The previous record low for new home sales during the month of February was 27,000, which was set last year.

#3 The “months of supply” of new homes in the U.S. rose from 7.4 months in January to 8.9 months in February.

#4 The median price of a new home in the United States declined almost 14 percent to $202,100 in the month of February.

#5 The median price of a new home in the U.S. is now the lowest it has been since December 2003.

#6 As of the end of 2010, new home sales in the United States had declined for five straight years, and they are expected to be lower once again in 2011.

#7 Now home sales in the United States are now down 80% from the peak in July 2005.

#8 New home construction starts in the United States fell 22.5 percent during the month of February.  This was the largest decline in 27 years.

#9 In February, the number of new building permits (a measure of future home building activity) declined to the lowest level in more than 50 years.  In fact, new building permits were 20 percent lower during February 2011 than they were in February 2010.

#10 There is a major glut of foreclosed homes that still need to be sold off.  David Crowe, the chief economist for the National Association of Home Builders, recently told CNN that the constant flow of new foreclosures being put on the market is a huge hindrance to a recovery for new home sales….

“One of the biggest detriments to building new homes is the flow of existing foreclosed homes.”

#11 The number of foreclosures just continues to increase.  This means that those trying to sell new homes are going to continue to be competing against a giant mountain of foreclosed homes for the foreseeable future.  An all-time record of 2.87 million U.S. households received a foreclosure filing in 2010, and that number is expected to be even higher in 2011.

#12 In fact, there are a whole lot of signs that there will be very high levels of foreclosures for years to come.  For example, according to the Mortgage Bankers Association, at least 8 million Americans are at least one month behind on their mortgage payments at this point.

#13 A stunningly high number of Americans are “underwater” on their mortgages right now.  This could lead to an increase in the number of “strategic defaults”.  31 percent of the homeowners that responded to a recent Rasmussen Reports survey indicated that they are “underwater” on their mortgages, and Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.

#14 The truth is that the U.S. doesn’t need a whole lot of new housing at the moment.  Right now, 11 percent of all homes in the United States are currently standing empty.

#15 Mortgage lending standards have become extremely tight.  Back during the housing bubble, almost anyone that was breathing could get a zero-down mortgage.  Today, mortgage lenders have made it extremely difficult to acquire a home loan, and it is quite typical these days for lenders to demand down payments of 20 percent or more.  This is dramatically reducing the number of home buyers in the marketplace.

#16 American families cannot buy homes if they do not have good jobs.  Unfortunately, it has become extremely difficult to find a job in the United States today.  This is especially true if you are looking for a good job.  It now takes the average unemployed worker in America about 33 weeks to find a job.

#17 There is not going to be a jobs recovery until the overall economy improves.  Unfortunately, the price of oil continues to rise dramatically and economic disasters all over the planet threaten to plunge the global economy into another major recession.

#18 On top of everything else, perceptions regarding home ownership are shifting in the United States.  In 1996, 89 percent of Americans believed that it was better to own a home than to rent one.  Today that number has fallen to 63 percent.

  • ezlivin

    Yeah, This IS the beginning of the END, as we know it. Get SPIRITUAL, MEDITATE, it’s the only way to cope with what is about to occur.


  • DownWithLibs

    I really have to hand it to impeachRonPaul. I have been very impressed over the months seeing him keep up his game of “Internet Troll”. (For those of you who don’t know what a Troll is, it is someone who leaves comments on sites like this, usually opposing the popular view of the majority of posters just to rial up the crowd – typically some bored 30-something year old living in their parents basement and living off of their Social Security). I have been expecting him to tire and run out of ideas to get at people in here, but he just keeps coming up with new jabs – like turning on the “bible” crowd. I was just reading some of his past comments and I ended up laughing so hard my side hurt.

    All I can say is – impeachRonPaul, I don’t know where you get these ideas, but I am finding you to be more entertaining than Jimmy Kimmel and Jay Leno combined! (Especially since you most likely believe the opposite of what you type.)

  • mondobeyondo

    1. How can individuals and families buy new homes without the income to pay for/sustain theae dwellings? People need jobs. First for the down payment, and then to keep up with the payments.

    2. Even if you do have a job, is there any guarantee you’ll be able to keep that job, to pay off that 30 year mortgage? What happens if you get laid off? And just how many security guards and short order cooks own mansions, anyway?

    3. It is ludicrous to construct new homes/office space when nobody is buying the existing housing/office space. (Re: Item #14)

  • Miriam Solos

    This is a great post and thankyou. It is a bout time someone heard the real truth on the housing index and prices.

    They government have been lying to us, while everyone is underwater with their mortgages, even the middle class are stuggling I am hearing. If you do no not have a job, how can you have a mortgage and with scarce jobs at the moment, how can you belive the government saying that house prices are stable. Look at the hard core facts.

  • In the United States, we have been overbuilding for decades. The number of new homes coming on to the market far exceed the need and the demand. The only reason it hasn’t crashed before now is because of the Fed ponzi scheme party that we have been on.

  • Conservative Constitutionalist

    Houston?…….We HAVE a problem..

  • Joe Vita

    I believe there is another very solid reason that recovery will be slower than most people may think though I haven’t seen this reported anywhere else. Record numbers of loans were refinanced in the last two years due to the availability of the lowest fixed rates in recent memory. Most of these property owners will not be in any hurry to re-enter the buying market for a long time, if ever. They simply will not be eager to give up their low mortgage payments in the forseeable future, even if there is somewhat of a recovery, in order to take on the much higher payments that will come with larger loans at higher interest rates. I believe this large segment of present borrowers make up a significant percentage of the currently limited number of property owners with reasonably good credit. Maybe you should add #19 to your list.

  • David

    Another crisis is inevitable in USA specially, which will result in the civil war or better yet revolution. Then the whole country will be devided for good this time! What is about to come no one can stop it anymore, whether or nor anyone prepared for it! I say let the whole damn thing collapse sooner than later! The New Global Reform needed to shake up the whole continents if our civilization can survive from this up-coming massive crisis!

  • mondobeyondo

    Everyone cheer along!
    “Ka-tie Couric! Ka-tie Couric!
    Rah, rah, sis-boom-bah!”

    There is no housing recovery.
    And there will be no housing recovery, unless and until the core fundamentals that provide people with housing are addressed:

    1) Good paying jobs (sorry, McDonald’s won’t do it)
    2) Keep existing homeowners from going “underwater”, and sinking into the mire of foreclosure
    3) There is a tremendous amount of real estate in this country, inhabited by black widow spiders and mice. Disinfect it, clean it out, remodel it and sell it – instead of building even more real estate. That is counterproductive.

  • PaulF

    impeachRonPaul may be a troll, or he may not – there are plenty of people who believe what he posts, more or less.

  • ezlivin

    Heres lies the problem.

    The mainstream says we’re in RECOVERY,


    the smarter ones know, WE HAVE NOT HIT BOTTOM YET!


  • The dark side of evolving real [brick & mortars] moving seamlessly to virtual [internet & digital] world.

    Reality? LIFE GOES ON despite tsunamis, increasing commodity prices, middleast tensions, wallstreet-type excesses & centralized govts/churches/groups “enjoying” bigger budgets/warchests.

    Count your blessings (-; and family/friends 😉

  • C

    Not necessarily Joe, people who refinanced at the lowest possible rate will actually build equity eventually, I don’t think they were giving this sweet financing to as many of the underwater homeowners who need it the most though. The reason existing homes are selling is because you can buy them for next to nothing, rehab them and sell for less than new construction. Contractors do know how to follow the money, which in this case is to just follow the destructive trail the banksters continue to leave in their wake.

  • Martin

    It is not just overbuilding its how the banks let the people finance their house. I live in Europe and recently they changed the rule for the mortgage we had a lot of house owners who did not actually paid the mortgage per month but they only paid the interest of the mortgage which means people never actually pay of their mortgage which sounds to me as a ponzi sceam. The new rules state that a person can get get a mortgage only for 110% worth of the house desired and in the mortgage therm mostly about 30 years they have to pay at least half of the real cost of the house!
    Its the fault of the banks and goverments who have allowed this ponzi sceam to exist and continue.
    In stead of building al lot of new homes goverment should contemplate to rebuild or modify existing homes for new owners that could save a lot of money. The same with builing of new factories thera are a lot of empty buildings who after a bit of modification could do well as new ones.
    In this day and era its about saving costs and try to keep the economy flowing without having to spend a bundel of money.

  • me

    It’s sad how bad our economy is. Just plain sad.

  • Nate

    “If you look at the historical numbers, new home sales in the U.S. always increased significantly after the end of every recession since World War 2. But that did not happen this time. Instead, new home sales have just continued to decline.”

    The reason is because, contrary to the government/media, we haven’t come out of the great recession (fancy phrase for a normal depression) yet!

  • sharonsj

    I love the idea that the economists are puzzled. Where have they been hiding for the last few years? Millions of people are losing their homes each year, so the market is flooded with properties at low prices. Why buy an expensive new home, which is probably built like crap, when you can get a more solid older home for less?

    Then if you add in that most people are going broke and can’t afford a home anyway, it’s obvious that the housing market completely sucks. Oh, and the banks are now asking for a huge down payment along with great credit scores. Sorry, but the home construction market is toast.

  • JJ

    More GOOD PAYING jobs are needed in this country to help revive the housing market. People making $10 an hour can’t afford a mortgage on anything unless it’s one of those $20,000 homes in Detroit.

  • jim

    Did you know the Federal Government is spending an equivelant of 2,6 KG GOLD per Second!!!

  • Rob

    Our own greed and lack of common sense helped get us here. We were all trying to impress others around us by buying bigger houses, cars, clothes, whatever. My grandparents are Mennonites, and they saw this coming a hundred miles away. It would never be a problem if we lived within our means…But no, we were suckered to go way beyond…now we are the slaves to who convinced us to servitude of the wealthy cartel…we have been outmatched.

  • impeachRonPaul

    Yes there are plenty of people in agreement with me. Churches have been used for centuries to control people. There is no reason for them to have so much power. This is not to say people should not be entitled to their beliefs but to force them on others is where the republicans are wrong.

  • Lisa

    All the McMansions built over the past 30 years will be empty in the next 10…

    Communities too far away from amenities, work, school will be uninhabitable…

    The American dream is over, or at the very least negatively redefined!

    May God help us!



  • Gabrial Singh

    Americans are just like milk cows. keep on buying (getting milked), till we cant buy no more. 75% of our economy is based on spending. No spending, there goes 75% of our economy. Do you think the republicans who voted for Nafta and Cafta think about that?? Well no, they are elected to make sure their corporate masters, keep on getting their greedy money. Milking the cow, till there is NO MORE Milk. And the cow is now dead. Any dairyman, would tell you, that is the road to nowhere. I guess we dont listen to Dairy Guys anymore. We killed the cow, now everyone is surprised, the gig is UP??

  • liberranter

    On top of everything else, perceptions regarding home ownership are shifting in the United States. In 1996, 89 percent of Americans believed that it was better to own a home than to rent one. Today that number has fallen to 63 percent

    FINALLY the sheeple are waking up!

  • PaulF

    Here is my response to you, “impeachRonPaul”.

    First of all, Churches control nothing in our society. Nothing – which is obvious.

    Secondly, Ron Paul is not a person who wants churches to control society. If you believe he has said or done anything remotely impeachable you are completely out of touch with reality.

    Unless, that is, that you think that teaching basic morality that is any way connected with the Judeo-Christian worldview is “enforcing religion” on people. Such a naive and illogical view fails to take into account several critical points:

    1) There is no such thing as “neutrality” when it comes to moral issues – it’s a matter of different sets of values. Such as those of materialistic atheism vs. [Judeo-Christian] theism. Your insistence that theism have no “effect” on law whatsoever is merely the imposition of an alternate philosophy/religion – atheism.

    2) One does not need religion at all to demonstrate the evil of the types of things you undoubtedly support such as homosexual “marriage” and abortion – one only needs the power of reason and natural law, which anyone can understand.

    3) All Western nations, including this one, have a long history of explicitly acknowledging God’s existence and basic morality. Look to our very Declaration of Independence for but one example, which speaks of our “Creator” and “truths” that are “self-evident”.

    You seem to be merely a confused person who thinks he has the right to enforce his atheist religion upon society. But Western society was built on the morals and philosophy of theism, not atheism.

    I think I’m going to save this response and post it here every time I see you repeating your (virtually always off-topic) idiocy.

  • Very interesting article!!! I’ve been in construction for years and I have never seen anything quite like this depression that we are in and its going to get worse!!!I travel all over Ohio doing repossessed home for some major banks in the country. More and more cities are looking like a third world country!!! The crime rate is getting out of hand because we have to watch our trucks, so the criminals will not seal us blind!!! We are doing more and more evictions to put people out of their homes which is very sad!!! People need to wake up now, for we have all went past the point of no return in our economy!!!

  • Golden Child

    The mainstream media is full of liars. They are experts at spinning skewed statistics to paint a more favorable picture to the majority of incredibly dumb ass Americans who don’t know anything about anything. The reason Americans haven’t been trampling over one another to buy new homes is because the economic downturn, erroneously labeled as a cyclical recession, hasn’t been impeded. Good jobs are still not available for millions of well-qualified American workers. Rich people and corporations are still hogging all the dollars and shipping out thousands of jobs overseas every month. The middle class in China is already bigger than the entire population of the United States. It takes an average of over eight months to get a job in America. But what the media doesn’t tell you is that most of those jobs that get found after nearly a year of searching are dead end low wage sh*t jobs. What the hell is it going to take for Americans to stop their forced resigned silent march into third world poverty?

  • median home price

    Median home price is still above $200,000. It is about twice as it should be!

  • TucsonKK

    Believe our honest GOV.
    Econmy is growing
    Stock Market is booming(Predicted to crash this year)
    Unemployment is at lowest level(Check out and about 1,500 & sometimes more jobs are lost everyday with long lists of business closings big & small companies)

    Yes during good times new home construction overbuilt
    Yes many many forclosures & underwater mortgages

    Cut Benefits,Slash pay,Layoffs,Privatize
    Loose jobs = Loose homes

  • tekroanin

    I hope you realize the economic collapse of america is intentional… it’s all planned out —
    you do realize that right Debt Slave???

    Yes YOU Debt Slave!!!

    If you want to do something about it… buy silver NOW! Arm up (buy a decent gun w/ a good supply of ammo) and Stock up on Food! And Fresh water!

    It’s only a matter of time now – when they’re gonna completely default on the dollar and then YOUR FCK”D!

    Your money is going to be worth less than toilet paper!

    Get It????

    I hope you do…

  • If somebody didn’t pay for their house, it’s not right for a court to just give it to them. This hurts lots of other people who put money into mortgage backed securities. The only change in the law that I would favor is a ban on mortgage backed securities.

    We help Americans find jobs and prosperity in Asia. For details, visit

  • Charles

    It’s hard to buy a new house, when you are unemployed. LOGIC… learn to use it. If you are sleeping on the streets, you aren’t out buying houses.

  • CommonCents

    Let’s make this real simple. There isn’t anything wrong with the housing market that lower lower lower prices won’t fix PERIOD !

    Every house on the market would see tomorrow if the price was low enough. In fact I’d buy two at the right price.

  • CommonCents

    To demonstrate my point.

    If apples were $40 a pound, how many do you think would sell ? How fast would you buy them ?
    Conversely, if they were 25 cents a pound the shelves would be empty before you could get your wallet out.
    But for some reason some people think keeping apples at $40 a pound is good for business and can’t seem to figure out what the problem is.

  • Bruce Levin

    You can not compare apples to oranges when making projections about the housing market. The smart homebuilders (most of them are) are not going to be building low quality energy inificient McMancions in distant suburbs. They will not sucessfully compete against the inventory that will be coming to market. The will build (and are building) a different product (except where they already have sunk costs in existing subdivisions). To compete they are building (and will in the future) smaller, energy efficient homes close to transportation corridors or close to employment centers. Examples of what we are going to see is what Forest City is doing with “Walkable Cities” such as the redevelopment of Stapleton in Denver or Mesa del Sol in Albuquerque. They can not and will not compete against the inventory that is coming to market – and they know this.

  • KG

    What I have read somewhere recently (I read a lot on the economy) is that new home builders are now finding more profit as companies to buy the foreclosed homes, fix the often vandalized properties, then sell them & maybe even carry paper on them – why swim up hill…Let’s get THIS party started!

  • King of the Zombees

    A new empty home is like a FEMA camp…stay away from it!


    America is tracking the trend line to End Of Empire laid by
    Over extension worldwide on Debt.
    Small group own most of the wealth
    10% own 70% net wealth  80% own 15%
    10% own 70% financial wealth  80% own 7%
    10% take 50% individual Income  50% take 13%
    70/15  70/7  50/13  = 190/35

    Simplistic– clear picture—can you see it? Congress cannot! White House cannot!

    Each of 10% own $7 of net wealth and each of 80% own $0.18
    Each of 10% own $7 of financial wealth and each of 80% own $0.09
    Each of 10% take $5 of individual income and each of 50% take $0.16
    $7  to  18 cents ratio: 700:18
    $7 to 7 cents 700:7
    $5 to 16 cents 500:16

    Is that not a picture of Third World Country?
    Is that not a picture of England in End of Empire?
    Is that not a picture of a Dictatorship
    I cannot paint a clearer picture but sadly our president is too busy preaching to his choirs
    The members of congress are too busy counting $$$$$$$$$$$$$ from Wall Street.
    Ministers of America $$$$$$$$$ Got Your Tongues?
    Where are our leaders? Counting $$$$$$$$$$$$$$$$$$$$$??????
    If my numbers are wrong advise

  • Mick Russom

    Oh, yeah, and new homes. They are built out of commodities. And with the printing press printing FRNs at a record pace, the land will be worth less than the materials use to construct a house.

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