US Home Slowdown Hits Builders

By Stewart Douglas

The rate at which new homes are being built in the US has fallen dramatically, according to official figures released today.

The figures released reflect the growing downturn in demand for housing within the US, as a result of a poor underlying economic performance and ongoing problems in the mortgage market.

The sub-prime lending market crisis, a saga that has plagued stock markets and investor confidence for months, is continuing to take its toll on the attitudes and investment habits of the world’s stock traders.

As a result of poor lending regulation, many high-risk borrowers have been mortgaged beyond their means, resulting in a rising default and foreclosure rate, whilst also providing liquidity problems for the major lenders.

As a result, some of the nations most powerful lenders could be on the cusp of bankruptcy, relying on cash investment from the Federal Reserve to keep them afloat for the time being.

And with the Federal Reserve taking measures to ease the liquidity situation at present, many analysts fear we have still yet to feel the full brunt of the sub-prime crisis, valued at over $100 billion.

Over the month of July, the rate at which new home were built fell by 6.1% from June to just 1.38 million units.  For the US, this figure is the lowest rate of new builds since January 1997.

On a day in which stock markets saw a turnaround on the back of Federal Reserve interest rate cuts, the news of the housing downturn appears not to have rattled investor confidence too greatly.

However, many analysts see the figures as yet another indicator of the more serious underlying economic problems in the world’s biggest economy, and a sign of things to come without further market intervention by the authorities in the US and around the world.