On Tuesday August 8th, the Federal Reserve decided not to raise interest rates for the first time in 2 years. It left the door open for future rate hikes down the road but felt the economy was cooling and inflation was in check. Higher oil prices and the slowdown in the housing market had the greatest affect on the decision.
This could be significant news for the construction and remodeling industries.
While it sounds great that they're not raising rates, their pause could be an indication that an economic downturn has already started.
In other important real estate news, housing starts were down 2.5% in July. While it might not seem like much, it is the 5th decline in the last six months. Even scarier, building permits were also down by a whopping 6.5% (the 6th straight decline and largest drop since September 1999.) These numbers all mean that the housing market is rolling over. Some are predicting that housing starts could be off by 20% and building permits off by 25% by the end of the year.
This data means that there will be less new home construction throughout the rest of 2006. Building companies may turn their attention to remodeling to generate revenue. Also, the depth of the bursting housing bubble has many homeowners running scared. They will be less inclined to take on new construction or remodeling projects. Even if interest rates stay level or drop, the consumer confidence level is down. It might take the rest of this year and all of next year to recover, no matter what the Fed does with rates. Stayed tuned to ConstructionDeal.com for developing news that
affects your business.
Source: MarketWatch - U.S. housing starts fall 2.5% in July