Harsh winter conditions have affected the housing market quite remarkably.
According to the Chicago Tribune, house construction plunged to 17% in February.
The paralyzing effects of winter on builders were more felt in the Northeast and Midwest, with home construction falling to 56.5% and 37%, respectively. In the West, the slide was 18.2% whereas only 2.5% decrease was recorded in the Southern region, notes Chicago Tribune.
Data from the Commerce Department revealed that only 897,000 homes started construction in February compared to the 1.08M houses engaged in January, states CNBC.
Along with low number of homes being built, home sales were also low this winter. Because of the fierce snow, fewer buyers decided to look for new properties. Others were focused on paying debts instead of using their money to purchase or give downpayment for new homes, says Tribune.
Its effect could linger till March 2015, says Chicago Tribune. "A weak first quarter is now a virtual guarantee as yet another cold winter is dampening activity," said Dan Greenhaus, brokerage BTIG's chief strategist.
But the situation will improve beginning spring, according to some analysts. In fact, in Seattle, more people have been wanting to buy homes even before the season starts, as reported earlier by CNBC. However, the supply is not enough.
At first it was thought that there were fewer listings because sellers want their prices to pick up in time for spring. But with this report, it indicated that a 17% home construction decline substantially equate to fewer supply actually available in the market---not just in Seattle, apparently.
Chicago Tribune explains that based on the data, the gains could actually be concentrated in the rental market. There was a 3% increase this February for approved building permits concentrated on apartment construction.
But with increasing rents, more people are now considering buying their own houses, reports CNBC. With the limited supply, potential buyers would have to wait for a few more months for construction to start and to finish.
Should We Be Worried?
According to Housing Wire, Ed Stansfield, chief property economist at Capital Economics, believes the market will rebound soon.
"The collapse in housing starts in February was largely a result of the unseasonably severe winter weather affecting the Northeast. With the wider economy growing strongly and credit conditions loosening, we expect starts to rebound before long," Stansfield states.
There are certain things that may also give us some hope---increasing number of jobs available and low mortgage rates. These things will push home sales upward soon, claims Chicago Tribune.
The report adds that 295,000 jobs were added last month. This would help more Americans earn and pay for their own homes.
Last week, the average 30-year fixed mortgage rate was 3.86 percent, according to Freddie Mac. It was low compared to last year's rate of 4.37 percent, notes Chicago Tribune.
With increasing home sales, this will also boost and improve the home builders' sentiment and lead them to start more constructions. The Big Story reports Monday, that the National Association of Home Builders/Wells Fargo builder sentiment index slid 2 points from February's 55 to 53.
So for now, get rid of winter's gloom and hope for a brighter market this spring.
