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Foreclosures And Sagging Economy Hit Construction Industry

Posted By admin || 19-May-2009

According to an article in the Star-Telegram, the number of foreclosures coupled with rising job losses and cautious consumers has lowered the number of new home and apartment construction by 12.8 percent last month to an annual rate of 458,000, units. That's the lowest number of new construction on record going back 50 years. And the low number of new building permits gives us a glimpse into what the future may hold for commercial real estate.

The article said:

Applications for new building permits dropped 3.3 percent to an annual rate of 494,000, also the lowest on record... Multifamily construction plunged 46.1 percent to an annual rate of 90,000 units after a 23 percent fall in March. Permits for multifamily construction dropped 19.9 percent to 121,000 units. Analysts said apartment construction is being hurt by a glut of condominiums on the market and by tightening credit conditions for commercial real estate.

We've already seen some construction companies file bankruptcy after experiencing drastic drops in financing and buyers.  This recent drop is probably the direct result of massive foreclosures entering the real estate market and creating a glut of cheap housing. Many new construction companies and commercial real estate investor simply cannot compete with this large supply of cheap housing for buyers.  Not to mention the lack of financing for even the cheapest foreclosures creates an environment where even willing buyers may not be able to buy.

Categories: Foreclosures
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