Spending on US Home Building Falls Beyond Forecast
Decline in US construction projects have been forecasted in November last year, but surprisingly, records now show that the spending on construction has fallen even less that half of what has been forecasted. Economists have estimated a median of 1.4 percent drop. This has reflected great declines in home building, while there have been gains in government and commercial building.
A fourth year is expected in the slump in home building as price declines continue and prospective buyers have troubles getting credit. The downturn in construction has influenced President Barack Obama to invest in schools, roads, and energy network, something similar to that of the highway construction boom in the 1950s.
The gain in commercial building is credited to the rise in power plant and factory constructions, which will not actually be sustained because of the worsening recession. Meanwhile, the 1.4 percent increase in public construction is credited to the construction of schools, highways, jails, and police stations, which are recorded to be the highest since records started in 1993.
Obama’s stimulus project is worth $850 billion, which could save or create 3 million jobs. Addressing the housing crisis is also one of the plans of his economic team.
Fewest new homes have been recorded in November and building permits have reached the lowest pace. This is due to rising foreclosures and weakening consumer confidence.
Federal Reserve is expected to succeed in making credit available for prospective homebuyers and reducing the borrowing cost. In fact, New York’s Fed Bank has started executed its $500 billion program by purchasing fixed-rate mortgage-backed securities that have been guaranteed by Freddie mac, Fannie Mae, and Ginnie Mae.
For as long as the economic crisis deepens, commercial and government construction is still prone to a downturn despite the good figures it is showing now. On the other hand, home building recession needs immediate attention to bring back consumer confidence and increase the number of new homes.
