Good Housing News: Construction Is Up
The construction of new homes posted the biggest jump in more than two years.
May 16, 2008— -- WASHINGTON (AP) -- Construction of new homes posted the biggest increase in more than two years in April, a rare bit of good news in what has been the worst downturn in housing in more than two decades.
The Commerce Department reported Friday that housing construction rose by 8.2 percent in April to a seasonally adjusted annual rate of 1.03 million units, as a big jump in apartment construction offset further weakness in single-family homes. The gain represented a recovery after a steep slump in March building pushed activity to the slowest pace in 17 years.
The surprising rebound in April was expected to be temporary given all the headwinds builders are confronting at the present, 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 percent to a seasonally adjusted annual rate of 326,000 units.
The larger single-family sector suffered continued weakness, dropping by 1.7 percent to an annual rate of 692,000 units.
Economists believe that housing construction will remain under pressure for some time to come 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 are losing their homes because they cannot keep up with escalating payments, particularly on subprime mortgages, loans extended to people with weak credit histories.