• Lisa Simpson
• Nov 3,2009
• In: Bank Foreclosures

Building Permit Numbers Decrease Indicating Trouble Ahead

Building permit numbers have decreased – it being an indicator of troubles ahead. The drop was the biggest since the last 5 months. For the housing industry it is not good news. A rejuvenating housing sector is vital for the improvement in the health of the overall economy.

The industry’s representatives speaking to a congressional panel recently said that the $8,000 tax credit for those who bought houses for the first time, should be stretched in time and expanded. Only such a step could ensure the emerging of the housing market to come out of the gloom of recession.

But the government is facing astronomical budget deficits and remains undecided about taking such a move. Some economists argue that such steps will not have the desired effect as those interested have already taken advantage of tax credits.

According to the Labor Department the wholesale price index fell by 0.6% in September because of fall in energy costs. Apart from food and energy, inflation limped back by 0.1%. Core prices of whole sale in the last 12 months ending in September showed a slight increase of 1.8%.

According to the Commerce Department the construction sector showed an increase of 0.5% in September. This was weak according to prominent economists. The seasonally adjusted annual rate was expected to be 610,000 units but it actually noted 590,000 units.

Building permit applications fell by 1.2% – it being the second set back in the previous three months. It was also the biggest drop since 2.5% slide in last April. It means there will be less construction activity in the forthcoming months. Till now the builders had sped up their work keeping in mind the expiry of tax credit on 30th November.

There are other grave challenges of foreclosures and unemployment facing the construction industry. Unemployment figures are the highest since last 26 years showing 9.8%. It is not expected to reach its peak till the onset of summer in 2010 said Sal Guatieri of BMO Capital Markets.

However Patrick of Global Insight said that the slow paced recovery will be the trend because the list of new homes have gone down and now builders have a reason to speed up sales whether tax credit is available or not. He explained, “We see a very slow recovery for housing that will gradually gain strength over the next two to three years before construction gets back to more normal levels.”

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