Harbinger of Doom

Forbes reports that the Commerce Department reported today that building permits fell 8.9% in April— the worst decline in almost two decades—and is an indication that the real estate market has yet to hit bottom. After reading the interesting posts over at the Dr. Housing Bubble blog, I’m not sure whether I should feel vindicated or depressed. Depressed is more the mood for the day because even though it’s good that home sales prices have slipped in recent months, rather than being isolated, the housing sector meltdown is only a harbinger of impending economic doom. According to various media reports, the housing fiasco is bleeding into other sectors, fewer cars sold, more expensive groceries etc, causing a ripple effect in our economy. Witness the weakened dollar. Ultimately, according to Dr. Housing Bubble, the economy will get worse, possible leading to inflation which means that the money I’m saving for a home purchase may not be able to buy as much even if sales prices drop. It’s not exactly a rosy picture painted.

The drop caught economists by surprise. Many had expected a more modest 3.1% decline. In March, building permits actually increased 1.8% after a large fall in February. The dismal figure underscores the massive correction currently taking place in the housing market, which has been plagued by suprime fallout and inventory gluts this year. Homebuilders, eager to burn through their oversized inventories, are now holding back on new building permits for future construction.