Housing construction continues to decline
— -- Housing starts tumbled 10.8% in March, a distress sign that economists say means housing construction will not make a big turnaround soon.
Construction of new homes and apartments fell to a seasonally adjusted annual rate of 510,000 units, the Commerce Department said Thursday. That was the second-lowest rate in the department's records, which go back 50 years.
The decline was more than many economists had expected and took off some of the glow from a reported increase in February. The February figure was also revised downward in Thursday's report.
Applications for building permits fell 9% in March to a 513,000 seasonally adjusted annual pace, the lowest on record.
Michael Larson, a housing analyst at Weiss Research, says the numbers are being strongly affected by the starts in the multifamily home segment, whose numbers tend to swing widely.
"Builders are having a hard time competing with these low prices on almost-new and foreclosed homes," Larsen says. "You're seeing things getting a little less bad on the housing arena, but there is still a market that is oversupplied. Nothing suggests an imminent recovery."
Reduced housing starts could help shorten the time necessary to clear the nation's oversupply of available homes.
The number of newly built homes for sale has shrunk from a peak of about 555,000 three years ago to about 300,000 today.
New construction has fallen in part due to the difficulty builders have getting credit, consolidations within the industry, and the fact that home prices are often coming in below construction cost.
Housing starts "are at extraordinarily low levels," says Mark Zandi at Moody's Economy.com. "We are at a bottom in terms of construction. It's very hard on the home-building industry."
He predicts new construction will pick up by this time next year.
The Commerce Department reported last month that home construction had increased more than 20% in February. That was revised in Thursday's report to 17.2%.
"The numbers are bouncing around, which is not that much of a surprise," says Joel Naroff at Naroff Economic Advisors. "Single-family starts were essentially flat. That gives me some hope that that segment of the market is starting to stabilize."
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