Jul
31
July 31 (Bloomberg) — Former Federal Reserve Chairman Alan Greenspan said falling U.S. home prices are “nowhere near the bottom” and the resulting market turmoil isn’t showing signs of abating.
While the odds of a recession are 50-50, achieving stable markets will “take a while,” Greenspan said today in a CNBC interview.
The economy grew at a 1.9 percent annualized rate in the second quarter after expanding 0.9 percent in the first quarter, the Commerce Department said in Washington. Gross domestic product was revised to show a contraction in the final three months of 2007.
More Americans filed claims for unemployment insurance last week than at any time in more than five years, the Labor Department said. Fed policy makers have cut the benchmark rate to 2 percent from 5.25 percent since September, halting the reductions in June amid rising concern about inflation.
Fannie Mae and Freddie Mac, the largest sources of money for U.S. home loans, are a “major accident waiting to happen,” Greenspan said. “The solution” is the “nationalization” of the companies, he said.
After the former Fed chairman spoke, Washington-based Fannie Mae dropped 69 cents, or 5.7 percent, to $11.52 at 3:48 in New York Stock Exchange composite trading. Freddie Mac fell 55 cents, or 6.3 percent, to $8.18.
“It important that we focus on stabilizing the financial system,” Greenspan said. Policy makers also need to reconcile slowing economic growth with rising prices, he said.
The U.S. faces “a very substantial change in the balance between growth and inflation,” Greenspan said.
Jul
31
Freddie Aims to Slow Foreclosures
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Mortgage financier to offer increased payments to loan servicers in effort to increase mortgage workouts.
NEW YORK (AP) — Freddie Mac is doubling the amount of money it pays loan servicers for each successful mortgage workout among other measures to keep struggling borrowers out of foreclosure, it said Thursday.
The mortgage financier is also giving more time to negotiate workouts in states with fast foreclosure processes and will reimburse servicers for door-to-door outreach.
Freddie will pay $500 for each repayment plan and $800 for each loan modification on Freddie-owned mortgages. Servicers will receive $2,200 for each short sale where Freddie accepts less than the full amount owed on the mortgage.
In some states and Washington, D.C., the government-sponsored entity will give up to 10 months from the due date of the last payment to find sustainable workouts for strapped borrowers. These states allow a lender to foreclose in less than 10 months.
The affected states are Alabama, Alaska, Arizona, Arkansas, California, Georgia, Hawaii, Maryland, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, North Carolina, Rhode Island, Tennessee, Texas, Virginia, West Virginia and Wyoming.
Freddie also will reimburse a servicer up to $15 per mortgage for leaving a door hanger and up to $50 per mortgage for knocking on a door that results in the borrower contacting their servicer.
These new policies go into effect Aug. 1. The outreach reimbursement expires March 31, 2009.
Shares of Freddie (FRE) fell 25 cents, or 2.9%, to $8.48 in midday training.
Jul
29
Home Prices Drop Record 15.8%
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The S&P/Case-Shiller Home Price Index of 20 cities fell for the 22nd consecutive month.
NEW YORK (CNNMoney.com) — May home prices dropped a record 15.8% from a year ago, according to the S&P/Case-Shiller Home Price Index of 20 cities. It was the 22nd consecutive month of decline recorded by the index. Prices fell 0.9% from April to May.
Each of the 20 metro areas covered by the index posted annual declines; nine posted record lows and 10 cities recorded double-digit drops.
The Case-Shiller 10-city Index posted a year over year decline of 16.9%, and a 1% month over month dip. Both the 10-City Composite Index and the 20-City Composite Index are reporting record annual declines.
“Since August 2006, there has not been one month where we have seen overall price increases, as measured by the two Composites,” said David Blitzer, Chairman of the Index Committee at Standard & Poor’s.
Losing streak
Case-Shiller has been tracking the 20-city index for 19 years, while the 10-city index is 21 years old. The current streak of price declines has been unprecedented in both its length and depth. The last extended decline began in in April 1990, when the 10-city index sank for 10 consecutive months. But that total loss was just 6.5%.
Since the 10-city index peaked in July 2006, it has plunged 19.8%. The 20-city is down 18.4% from the peak.
The 20-city index’s Sun Belt cities, which recorded the biggest price gains during the boom, have led the charge down. Las Vegas prices have plummeted 28.4% during the past 12 months; Miami prices fell 28.3%; and Phoenix homes lost 26.5% of their value.
Midwest metro areas, which have endured tough economic times for years, are also feeling the pain. Detroit prices are off 17.4% for the 12 months, and Cleveland is down 8%.
Northeast cities like Boston, down 6.2% for the 12 months, and New York, off 7.9%, have been less volatile than the Sun Belt.
The smallest year-over-year declines were recorded by Charlotte, N.C. (down 0.2%), Dallas (down 3.1%), and Denver (down 4.8%).
The soaring numbers of foreclosures are helping to push down prices. Banks tend to slash prices when selling repossessed homes, since they lose money every month a house sits vacant. They must pay property taxes, maintenance expenses and utility costs while getting nothing back in return.
Those sales, in turn, tend to bring down prices in the rest of a given neighborhood, creating a vicious cycle.
Foreclosures accounted for a large – and growing – share of all existing homes sold in some markets. In California, for example, 40% of the existing homes sold during the three months ended June 30 were foreclosures, according to DataQuick, a real estate information provider. That’s up from just 5.4% during the same period in 2007.
Rays of light
Optimistic observers might point out that price declines appear to be slowing. The 10-city index’s 1% month to month dip in May was less than April’s, when it registered a 1.5% decline, while the 20-city index fell just 0.9% in May after dropping 1.3% in April.
But that 0.9% dip repeated over 12 months would result in an annualized rate of 13%, according to Dave Seiders, chief economist for the National Association of Home Builders. Still, it’s an improvement over the rate of decline from Jan. to Feb, which was 26% on an annualized basis.
“There’s still strong downward movement,” he said, “but it’s not as rapid as earlier in the year.”
There are, however, some positive signs.
“The smaller price decline in May suggests, provides a first hint, that conditions may start improving,” said Mike Moran, the chief economist for Daiwa Securities America.
“If you look at home sales data, they’re starting to stabilize,” he said. “Some potential buyers have decided to step back into the market. They see attractive opportunities. I don’t think the correction is over but the tone is improving.”
Lawrence Yun, the usually optimistic chief economist for the National Association of Realtors, pointed out that in places like Las Vegas and Phoenix, where drastically lower prices have led to an uptick in sales volume, conditions may be stabilizing.
But Patrick Newport, an economist with Global Insight, an economic forecasting firm, thinks there are more hard times ahead. He points out that seasonal variations may account for what appears to be a slowdown in the pace of the May decline.
“You can’t go by monthly numbers,” he said. “What I look at is the Census Bureau’s inventory of vacant homes on the market. That hasn’t budged much, although it dropped to 2.8% [of total homes for sale] in the second quarter from 2.9%.”
Historically, vacant homes have made up about 1.7% of housing inventory.
“What’s worrying me is that foreclosures are adding to inventory, and the inventory numbers tell you what to expect for the next couple of years,” says Newport. “They’re saying home prices will drop.”
And Yun expresses concern over mortgage rates, which have been on the rise. Higher rates can cancel out more affordable prices by increasing monthly mortgage payments.
The new housing rescue bill that just cleared Congress over the weekend may help, however. “The tax credit for first-time home buyers will offset the slight rise in mortgage rates,” he said.
Jul
28
Paulson Unveils New Mortgage Plan
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Four big banks sign onto the ‘covered bond’ concept in a new bid to ease the strains in U.S. mortgage markets.
NEW YORK (Fortune) — The government is reaching across the Atlantic in its latest bid to revive the U.S. housing market.
On Monday, Treasury Secretary Henry Paulson laid out guidelines for banks seeking to issue so-called covered bonds as a way to finance home mortgages. Four big U.S. lenders – Citi (C, Fortune 500), Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) – said they support the venture, though none said they have plans to issue the bonds right now.
By issuing covered bonds, a bank borrows money from investors, using assets on its balance sheet – such as home mortgage loans – as collateral. The investor gets a claim on those specific assets in the event the bank that issued the bonds fails, rather than having to line up with other creditors. Until now, covered bonds haven’t been issued in the U.S., though the concept has long been in use in Europe.
But with the housing bust threatening to push the economy into recession – the International Monetary Fund warned Monday that “a bottom for the housing market is not visible” – policymakers and financial institutions have been trying out new ideas in hopes of making mortgages more available, while breaking the cycle of falling house prices and rising foreclosures.
“Covered bonds have the potential to increase mortgage financing, improve underwriting standards, and strengthen U.S. financial institutions by providing a new funding source that will diversify their overall portfolio,” Paulson said. The efforts of the big banks would “kick-start” the market’s development, he added.
The move comes as shares of banks and brokerage stocks posted their latest sharp decline and investors fret over the fallout of falling house prices on the health of financial institutions. While the Federal Reserve has slashed short-term interest rates over the past year, partly in response to the sharp decline of house prices, mortgage rates recently soared to highs last seen at the turn of the century.
Banks in Europe have used covered bonds as a primary source of mortgage finance for many years, and the market is worth more than $3 trillion.
An alternative way to lend
Until recently, American lenders have preferred to sell their mortgage loans to investors as securities, in the process known as securitization. But when loans to borrowers with poor credit histories started souring at unusually rapid rates last summer, investors fled the market – a trend that marked the beginning of a credit crisis that has choked off lending in the housing market and, increasingly, elsewhere in the economy.
Monday’s move comes on the heels of the Senate’s approval of a bill that gives the Treasury the authority to buy shares in two struggling U.S. mortgage firms: Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). Fannie and Freddie are the biggest providers of mortgage finance in the nation, through their guarantee of mortgage-backed securities and the purchase of mortgages for their own portfolios. Together, the firms hold or guarantee some $5 trillion of mortgages and mortgage securities.
With U.S. house prices having plunged at a double-digit rate over the past year, fears have arisen on Wall Street that Fannie and Freddie will face losses that will eat through their thin capital cushions.
Thus, with the securitization market in disarray and the government potentially on the hook for a bailout, Paulson is looking for ways to shore up the mortgage market.
For investors, one potentially appealing aspect of covered bonds lies in their structure. Because the bonds are backed by a specific pool of mortgages or other loans, investors in the bonds issued by a failed bank wouldn’t find themselves in line with other general creditors. For banks, covered bonds could offer a new way to raise funds for mortgage finance, now that the securitization model is faltering.
Needed: more capital
Still, while the market can always use a new financing vehicle, covered bonds have drawbacks. One reason banks flocked to the securitization model was that selling their loans to a third party generated lucrative fees and eliminated the need to hold capital against the loans.
Covered bonds, being on the balance sheet, will create new capital requirements for banks that have spent much of the past year raising cash at a hefty cost to existing shareholders.
And while Europe’s covered bond market is certainly large, it’s no stranger to the fears that have shaken other debt markets. In fact, the U.K. covered bond market went into a tailspin late last year. And the yield on covered bonds sold in Europe by the two U.S. banks that have sold the bonds – Washington Mutual (WM, Fortune 500) and Bank of America – have soared since those offerings were made in 2006, Bloomberg reports.
Moreover, Monday’s moves didn’t change the fundamentals of the U.S. housing market. House prices remain above long-term norms, based on income and rental rates, and banks have gotten much stingier about who’s eligible for a loan. Until demand for housing stops declining, changes in mortgage finance aren’t likely to make much of a dent in the big picture.
Jul
26
It feels like the summer of 1931. The world’s two biggest financial institutions have had a heart attack. The global currency system is breaking down. The policy doctrines that got us into this mess are bankrupt. No world leader seems able to discern the problem, let alone forge a solution.
The International Monetary Fund has abdicated into schizophrenia. It has upgraded its 2008 world forecast from 3.7pc to 4.1pc growth, whilst warning of a “chance of a global recession”. Plainly, the IMF cannot or will not offer any useful insights.
Its “mean-reversion” model misses the entire point of this crisis, which is that central banks have pushed debt to fatal levels by holding interest too low for a generation, and now the chickens have come home to roost. True “mean-reversion” would imply debt deflation on such a scale that would, if abrupt, threaten democracy.
Jul
24
Home Sales at 10 Year Low
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Realtors’ group says the number of existing homes sold in June fell 2.6% to their lowest level in 10 years.
NEW YORK (CNNMoney.com) — Sales of existing homes in June slowed more than expected and hit their lowest level in 10 years, according to an industry trade group report released on Thursday.
The National Association of Realtors reported that sales by homeowners dipped in June to an annual pace of 4.86 million, down 2.6% from a pace of 4.99 million in May.
That’s the lowest rate on record since the first quarter of 1998, when existing home sales fell to an annual pace of 4.83 million, according to Walter Molony, spokesman for NAR.
The existing home sales rate – including single-family, town homes, condominiums and co-ops – is down 15.5% from the 5.75 million units sold in June 2007.
The 4.86 million sales figure came in well below the 4.95 million estimate forecast by economists surveyed by Briefing.com.
“The factors that are weighing on the housing market remain in place – weak consumer confidence, a weak labor market and rising mortgage rates – so there are some strong fundamental headwinds still weighing on the market,” said Robert Dye, senior economist at PNC Financial Services Group.
“We are hoping for a bottom, but we are not expecting any significant rebound from that bottom until the labor market and consumer confidence starts to improve,” he added.
But with inventory still on the rise, home prices are falling further. The number of homes available for sale at the end of June rose 0.2% to 4.49 million, which represented an 11.1-month supply of inventory at the current sales pace, up from a 10.8-month supply in May.
Meanwhile, the median price of a home sold in June fell to $215,100, down 6.1% from $229,000 a year earlier.
Single family homes. Sales of single-family homes declined 3.2% to an annual rate of 4.27 million in June from 4.41 million in May. That’s 14.8% below the 5.01 million-unit pace in June 2007.
The median existing single-family home price was $213,800 in June, down 6.7% from a year ago.
New homeowners. First-time home buyers are not confident that this is the best time to enter the market. “A recent online survey of Realtors shows nearly a quarter of potential home buyers are waiting on the sidelines,” NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said in a written statement.
“About four in 10 homes are purchased by first-time buyers, which frees existing owners to trade up,” according to Lawrence Yun, NAR’s chief economist.
Rising rates. Higher interest rates are also holding buyers back. “Even as prices are coming down, the total mortgage price is under upward pressure from rising mortgage rates,” said Dye.
On Thursday, Freddie Mac (FRE, Fortune 500) said that the 30-year fixed-rate mortgage jumped to 6.63% for the week ending July 24, 2008, up from 6.26% last week.
“Market concerns about rising inflation, further weakness in the housing market and greater probability that the Federal Reserve will raise short-term rates this year all combined to push mortgage rates higher this week,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a written statement.
Regional sales breakdown. Existing-home sales in the West actually rose 1.0% in June, but were 6.4% lower than a year ago. Buyers were attracted to bargain prices, with are down 17.2% from June 2007.
In the South, existing-home sales fell 3.1% from May to June, and 18.1% year-over-year. Home prices in the South have only fallen 2.4% from a year ago.
Midwest existing-home sales declined 3.4% in June, and slid 17.6% from a year ago. But the median price there was actually up 2.8% from June 2007.
June existing-home sales fell 6.6% in the Northeast on a month-to-month basis and dipped 15.8% from June 2007. The median price was also down sharply, 12.6% below June 2007.
Despite the decline in the housing market as a whole, there are a few bright spots. The NAR says that existing-home sales are actually rising significantly from a year ago in areas that have been particularly hard-hit by the housing bust, such as Bakersfield, Calif.; Fort Myers, Fla.; and Las Vegas, Nev.
In addition, “sales are now beginning to pick up in Orlando, Fla., Phoenix, and Oakland, Calif.,” Yun said in a written statement. “Interestingly, sales fell in Atlanta, Houston, and Kansas City, Mo., despite affordable home prices and solid local employment conditions.”
Housing bill. The report came a day after the House passed a bill that will provide up to $300 billion to help struggling homeowners and will back the mortgage finance giants Fannie Mae and Freddie Mac. The bill will go to the Senate next for vote.
Jul
24
WASHINGTON – Sales of existing homes tumbled more sharply than expected in June, pushing activity down to the lowest level in more than a decade.
With an already huge glut of homes on the market, median prices fell compared to a year ago and analysts predicted prices would keep falling until next spring as tighter credit, a slipping job market and rising foreclosures scare potential buyers away.
The National Association of Realtors reported Thursday that sales dropped by 2.6 percent last month to a seasonally adjusted annual rate of 4.86 million units, the slowest sales pace since the first quarter of 1998.
The decline was more than double the 1 percent drop that economists had been expecting and left sales 15.5 percent below where they were a year ago.
The downward slide in sales depressed prices, too. The median price for a home sold in June dropped to $215,100, down by 6.1 percent from a year ago. That was the fifth largest year-over-year price drop on record.
Inventories of homes on the market rose by 0.2 percent to 4.49 million units, meaning it would take 11.1 months to exhaust the current backlog at the June sales pace, the second highest level in the past 24 years. The glut of unsold homes is being made worse by a rising wave of foreclosures.
The steeper-than-expected fall in home sales abruptly ended a stock rally being driving by good earnings news. The major indexes fell about 2 percent, including the Dow Jones industrial average, which lost more than 280 points.
Sales of existing homes dropped in all regions of the country in June except the West, which posted a 1 percent sales increase. Sales fell by 6.6 percent in the Northeast, 3.4 percent in the Midwest and 3.1 percent in the South.
Analysts said the slight sales rebound in the West reflected big price declines in many parts of California that are helping to make homes affordable once again.
“California is on the leading edge of a housing recovery and that is because prices are falling fast in many areas and that is restoring affordability,” said Mark Zandi, chief economist at Moody’s Economy.com. But he predicted any rebound nationally will be slow in coming, reflecting the continued surge in foreclosures as many subprime mortgages reset to higher rates.
“It will be a long and painful end to this downturn but at least we are beginning to see some signs of the end,” Zandi said.
Many analysts said they expected sales would stop falling by the end of this year and prices would stabilize by next spring although they said any significant rebound in prices could be years away.
Seeking to address the housing crisis, the House on Wednesday approved a sweeping rescue aimed at helping as many as 400,000 homeowners avoid foreclosure. It would also bolster the stability of mortgage giants Fannie Mae and Freddie Mac by expanding the resources the federal government can extend to the two mortgage giants.
Lawrence Yun, chief economist for the Realtors, said a significant feature of the rescue package is a tax credit worth up to $7,500 for first-time home buyers who purchase between April 9 of this year and July 1, 2009. Yun estimated that up to 3 million first-time home buyers could qualify for that tax break, providing a sizable boost to sales at a critical time.
Other private economists were not as optimistic, pointing to all the problems facing the economy right now from rising layoffs to plunging consumer confidence and tighter lending standards that banks are imposing in the face of billions of dollars lost from bad mortgage loans.
Another potential threat is rising mortgage rates with Freddie Mac’s nationwide survey showing that 30-year mortgages jumped to 6.63 percent this week, the highest level in nearly a year, reflecting financial market turbulence.
“The housing bill working its way through Congress has some very positive elements but it would be easy to negate those features if mortgage rates keep rising,” said Brian Bethune, chief U.S. financial economist at Global Insight.
Jul
17
An industry outfit hopes that by making it easier for investors to understand pools of mortgage-backed securities, it can help restart the near-dead market for them.
NEW YORK (CNNMoney.com) — A group representing the buyers and sellers of mortgage backed securities unveiled a plan on Wednesday to recharge the moribund mortgage market.
Most of the nation’s mortgage loans are packaged together by their issuers – such as Countrywide, Wells Fargo and Wachovia (WB, Fortune 500) – and sold to investors as mortgage backed securities. That’s how lenders raise more money to make more loans.
As the housing crisis hit last year and losses in these investments began to pile up, individuals and institutions like pension funds, hedge funds, insurance companies and banks, stopped buying these pools of residential mortgages. That left lenders cash-strapped, and made it harder for home buyers to get loans.
But now the American Securitization Forum hopes its plan, Project RESTART, will increase the supply of mortgage loans available to borrowers and lower their cost. Jump starting the mortgage market could provide a needed boost to the struggling housing market.
“Project RESTART’s goal is to rebuild confidence in investors in these securities,” said Tom Deutsch, ASF Deputy Executive Director.
This task is especially critical as fears continue to swirl about the health of the government sponsored enterprises, Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), which also buy loans from lenders to package and sell to investors. For the past year or so, Fannie and Freddie have provided the bulk of mortgage funding, adding to the strain they are under.
This plan aims to revive the segment of the secondary market that trades in mortgages that are not backed by the two mortgage giants.
“Mortgage credit is extremely constrained,” said Tom Deutsch, ASF’s Deputy Executive Director. “The market is not functioning as it should and this is one of the ways that will help restart it.”
How it worksThe plan calls for making the process of securitizing loans for investors more transparent, so that they can more clearly understand the nature of the mortgage pools they purchase. That would allow investors to better assess the risks and rewards of individual pools and judge their pricing more accurately, and should encourage then to resume buying these securities.
Until now, lenders provided little information to investors about the nature of the mortgages in a given pool. And most pools were made up of a wide variety of high and low risk loans. That meant investors often didn’t have a real understanding of just how risky these investment pools were.
Ideally, according to Deutsch, the financial information on each individual mortgage borrower in a pool of loans would be available to investors. That’s not practical. But by having lenders aggregate the borrower data in a standardized way and then disclose the character of the securities as transparently as possible, he hopes to accomplish nearly the same thing.
Pools of mortgages, for example, could be structured so that all the loans in them share many of the same traits. One pool might only contain loans from prime borrowers who have fully documented their income and their assets, put down a down payment of at least 20% and have credit scores of 720 or greater.
A conservative investor looking for a low-risk but moderate revenue stream might opt to purchase a piece of that pool.
On the other hand, more risk-tolerant investors might prefer a piece of a pool featuring all subprime borrowers with low credit scores that would offer a higher rate of return. The key is that each of these investors would know what they are buying.
Initially the focus will be on residential mortgages of all types, jumbo, prime, Alt-A and subprime, according to Patrick Greene, a senior vice president of Wells Fargo Bank and (WFC, Fortune 500) a member of the panel that worked on the plan.
“Wells Fargo … spends every day thinking about how we can create more liquidity,” he said.
And ASF has big plans to eventually apply the same kinds of processes and standards to other consumer debt that is securitized, including student and auto loans and credit cards.
The ASF has asked industry participants to submit comments on the plan between now and Aug. 22, and the plan will be adjusted accordingly. Deutsch is optimistic.
“This is an initiative with significant support from the industry, as it was developed by participants in all areas of the securitization market,” he said. “We expect to see widespread adoption of the [plan].”
Jul
17
While second quarter earnings Thursday from JP Morgan Chase & Co. (JPM: 39.52 +0.97%) beat analyst expectations and helped set the stage for another rally in stocks ahead of market open, executives at the company sounded a strong warning bell over growing trouble in the nation’s mortgage market.
JP Morgan said that net income for the second quarter was $2 billion, or 54 cents a share, a drop of 53 percent from year-ago totals; analysts had been expecting 44 cents per share, according to a Bloomberg News report.
The firm recorded markdowns of $1.1 billion related to leveraged lending and mortgage-related positions; it also absorbed $540 million net loss on the late May merger with Bear Stearns.
Jul
17
Single-family home construction drops, while a change in New York City laws boosts construction of apartment buildings.
WASHINGTON (AP) — Construction of single-family homes fell in June to the slowest pace in 17 years although a change in New York laws helped give a big boost to apartment building.
The Commerce Department reported Thursday that construction of single-family homes dropped by 5.3% in June to a seasonally adjusted annual rate of 647,000 units, the weakest performance since January 1991, another period when the housing industry was going through a severe downturn.
However, construction of multifamily units surged by 42.5% last month, thanks to a change in New York City building codes that spurred a wave of apartment construction in that area. Taken together, single and apartment construction rose by 9.1% to an annual rate of 1.066 million units.
But the total increase was viewed as an aberration that did not give a true picture of the continued weak state for the housing industry because it was skewed by the huge jump in apartment building in New York.
Private economists are predicting that housing will continue to be under strains for the rest of the year. The troubles in housing, combined with related turmoil in the financial sector attributed to billions of dollars of losses on mortgage loans, are dragging down the total economy, raising risks of a recession.
Separately, the Labor Department reported that the number of newly laid-off people signing up for jobless benefits rose by 18,000 last week to 366,000, the highest level since late June. The increase was below the number that economists had been expecting.
The report on housing construction showed that applications for building permits, considered a good sign of future activity, rose by 11.6% to a seasonally adjusted annual rate of 1.091 million units. However, this increase was also skewed by a big rise in the volatile apartment sector. Permits for multifamily construction soared by 39.4% while permits for single-family homes fell by 3.5%.
Analysts said they expect that builders will continue to slash construction as they struggle with an extremely difficult environment. The National Association of Home Builders said Wednesday that its survey of builder sentiment fell to a record low of 16 in July, down from 18 in June,
That decline reflected all the problems facing the housing industry at the moment from a weak economy that is pushing down employment and consumer sentiment to surging mortgage foreclosures which are dumping more homes on an already glutted market.