The Commerce Department reported Friday that housing construction rose by 8.2% in April, the biggest increase in more than two years.The growth came from a big jump in apartment construction which increased 36%. The larger single family home sector however dropped by 1.7%. Application for building permits, considered a good sign for future activity rose by 4.9%, the first gain in five months. Overall housing construction activity was still 30.6% below the level of activity a year ago.
The slump in the housing sector is one of the factors which has almost pushed the US economy into recession. Economists feel the rebound is temporary. They say the sector will remain under pressure until the backlog of unsold homes is cleared, and consumer confidence which fell to a 28 year low of 59.5 in early May shows improvement.
Lawrence Yun, chief economist with the National Association of Realtors thinks otherwise. He admits that although the first half of 2008 has been weak, the second half of the year should see an improvement which could lead to a home value growth of more than 20% over the next five years. Delaying the recovery is the hesitation of lending institutions to finance home sales unless strict conditions are fulfilled. The high foreclosure rate and adverse media comments are other factors affecting home sales, he says.
Yun points to California which is one of the states worst hit by the foreclosure crisis.He says the market there is showing signs of turning around. 'The hardest hit market is showing signs of recovery, that is signaling to the rest of America that the worst conditions will pass. I think there will be more confidence about entering the marketplace.'
Political parties are reported to be close to a deal that will allow the federal government to insure up to $300 billion of refinanced mortgages. A tax credit which could give home buyers up to $7000 in incentives to buy a house is also proposed. In spite of a veto threat by President Bush, committee Chairman, Democratic Senator Christopher Dodd remains confident that a deal can be worked out.