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Friday, May 16, 2008
Housing Starts Increase Surprising 8.2% in April
Associated Press
WASHINGTON--
Construction of new homes posted the biggest increase in more than two years in April, a rare spot of good news amid the worst downturn in housing in more than two decades.
The Commerce Department reported Friday that housing construction rose by 8.2% in April to a seasonally adjusted annual rate of 1.03 million units. Building of single-family homes continued to weaken, however. The growth came from a big jump in apartment construction.
Still, the overall gain represented recovery after a steep slump in March building pushed activity to the slowest pace in 17 years.
The surprising rebound was expected to be temporary given the headwinds builders are confronting, from slumping sales to soaring home foreclosures.
The strength in April came entirely from a huge rebound in apartment construction, which can be extremely volatile from month to month. Apartment building jumped by 40.5% to a seasonally adjusted annual rate of 326,000 units.
The larger single-family sector dropped by 1.7%to an annual rate of 692,000 units.
Economists believe that housing construction will remain under pressure until builders have more success in reducing a huge backlog of unsold homes.
That effort is being made more difficult by a record wave of foreclosures as millions of borrowers lose their homes because they cannot keep up with escalating payments, particularly on subprime mortgages, loans extended to people with weak credit histories.
By region of the country, construction posted the largest gain in the Midwest, an increase of 24.4% when compared to March. Construction rose 18.5% in the West and was up 3.6% in the South. However, construction fell by 12.7% in the Northeast.
Even with the improvement, housing construction nationwide was 30.6%below the level of activity a year ago.
The National Association of Home Builders reported Thursday that its monthly survey of builder sentiment edged down in May to a reading of 19, just above the all-time low of 18 set in December. The survey had held steady at the low level of 20 from February through April.
David Seiders, the group's chief economist, said that conditions in the industry have continued to deteriorate.
FOX Translator
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Think telemarketer. Except, it's much worse because you can't avoid this call. Instead, when you get one, it's time to pay up, because the bet you placed with borrowed money is eating itself.
Buying stocks on margin is risky because you're essentially "playing" with someone else's money. If the shares you purchased tank, your losses will likely be more than if you had bought the shares with your own cash. This is why the New York Stock Exchange and the Nasdaq impose certain restrictions on the practice.
Initially, you¿re only allowed to borrow half of the money from your broker when buying on margin. You set up a margin account and from then on must keep a maintenance balance of at least 25% of the market value of your stocks.
If the market value of your investment falls below this minimum, you're required to make up the difference by either depositing money into your account or selling some of the stock. If your broker notifies you that you've dipped below this minimum, it's called a margin call.
If you fail to adjust your account accordingly, the broker is authorized to sell shares in your account to make up the difference. The broker can even sell other stock in your margin account to make up for the loss that selling the shares didn't cover.
As an example, say you buy $8,000 in stocks of any given company. You borrow the maximum $4,000 from your broker and pay the rest yourself. Now, if and when the total value of these shares changes, you must make sure you maintain at least $2,000 (25%) in equity. In other words, if the total value were to drop below $6,000, you¿d be in trouble since you only put in $4,000 of your own money to begin with.
