RISMEDIA, June 18, 2010—(MCT)—Residential-construction starts fell in May 2010 to their lowest level in a year, as an anticipated slowdown in sales after the expiration of the home buyers’ tax credits took hold of the market.

The Commerce Department reported recently that overall housing starts fell 10% from April, while building permits were down 5.9%. The biggest hit in starts came in the single-family sector—down 17.2% from April. Still, both overall starts and permits were up from a year ago, 7.8% and 4.4%, respectively.

“The plunge in housing starts in May underlines that a sustained housing rebound has yet to get under way,” said economist Nigel Gault, of IHS Global Insight in Lexington, Mass. “The improvement in starts through April was driven by the extended tax credit, which expired April 30. Now, the credit is gone.”

Although interest rates remain low—fixed 30-year mortgage rates are under 5%—and prices have declined enough since the peak of the national real estate boom in 2006 to make purchases affordable, Gault said credit remains tight and the market continues to be overstocked with homes.

National Association of Home Builders chief economist David Crowe said, “No doubt, a certain amount of building and buying activity that would have taken place in May was pulled forward to accommodate the tax-credit program’s end date, which is why we have projected some softening of the numbers.”

Sales of both newly constructed and previously owned homes began to slump almost immediately after the April 30 tax-credit deadline.

Naroff said the May decrease in building permits indicates that “builders are trying to keep inventory under control.” But Crowe of the builders’ association suggested that there would be more houses under construction if lenders would loosen their purse strings. “Ongoing difficulties builders are having in obtaining financing for viable new projects are complicating factors that are slowing the industry’s recovery,” Crowe said.

The second quarter stats for American Fork and Utah County will be interesting to review to see any correlation with the national statistics for residential-construction statistics.  Currently, it is difficult to sell land in American Fork and Utah County, especially lots,  due to the difficulty of builders and buyers in securing a construction loan.  Builders are waiting to build until they have a client and a construction loan.

Tags: American Fork, buyers, construction loan, Tax credit, utah, Utah County

Posted on Friday, June 18th, 2010 at 2:02 pm and is filed under Builders. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.