Oversupply of Home and Land Foreclosures for Sale Hurt Home building

by on States

The high number of land foreclosures for sale and distressed residential properties continued to hammer the whole country's new home market. Housing starts declined in February of this year to the lowest level recorded in almost two years. Meanwhile, building permits fell to their lowest totals in nearly 50 years.

The drop in house construction activities was felt in almost all markets of the U.S. Locally, the impact of Salt Lake City foreclosures for sale and distressed property numbers in the rest of the state on the new home market mirrored what was happening nationwide. The housing industry of the region, along with the rest of the country, remained weak as distressed and foreclosed real estate dominate the residential property market.

With more foreclosure homes for sale in Utah and distressed properties all over the U.S. to compete with, home builders only managed to record a total of 479,000 housing starts for the whole country in February 2011. The total represented a decline of 22.5% from January 2011. According to the U.S. Commerce Department, the figure was the lowest recorded since April of 2009 and was also the second lowest total recorded in nearly 50 years. The February decline followed a January surge in building activities, buoyed mainly by apartment projects.

Despite a lot of cheap land foreclosures for sale available to home developers, most of them did not consider it wise to enter the home building market last month. Construction activities for single family houses, which usually account for as much as 80% of total housing starts, recorded a drop of 11.8% in February of this year. The condominium and apartment construction market, which spearheaded construction gains in January, posted a 47% decline in February.

Meanwhile, real estate analysts are predicting that bank foreclosed homes will continue to edge out new home building activities as building permits issued in February also plummeted. Building permit numbers are used by analysts to predict future construction activities, and the 8.1% decline in February led them to declare that the coming months will not be any better for the home building industry. The February decline marks the lowest point for this particular indicator since 1960.

Real estate experts stated that the huge decline in housing starts and the continuous rise in the number of residential and land foreclosures for sale showed that the U.S. real estate market is far from a recovery. They stated that it will likely take a few more years before the real estate market reverts back to normal.