Single-family building dips to slowest in 17 years
WASHINGTON (AP) - July 17, 2008 Builders started work on single-family homes at an annual rate
of 647,000 units last month, a drop of 5.3 percent from the
previous month, the Commerce Department reported Thursday. It
marked the slowest pace for singe-family activity since January
1991, another period when housing was going through a severe
downturn.
That decline in single-family construction was in contrast to a
42.5 percent surge in apartment building, an increase that was
attributed to a change in New York City building codes that
triggered a rush by builders to take out applications before new
regulations took effect on July 1.
In the way the government presents the housing statistics, a big
increase in one area can greatly influence the overall figure
because the change for one month is multiplied by 12 to get an
annual figure.
With the big surge in apartments in New York, total construction
rose by 9.1 percent to a seasonally adjusted annual rate of 1.066
million units, still 26.8 percent below the level of a year ago.
Economists said they expect that figure to resume a downward slide
in coming months given all the problems facing housing at the
moment.
The housing industry, which has been in a slump for more than
two years, is struggling to cope with record levels of unsold new
and existing homes. That glut is being expanded by swelling levels
of foreclosures which are dumping even more houses on the market.
Buyers are reluctant to purchase a home with home prices still
falling sharply and even those buyers who are ready to commit are
having trouble qualifying for a loan as lenders tighten standards
in response to soaring mortgage delinquencies.
Banks and other financial institutions are struggling to cope
with billions of dollars of losses on bad mortgages. The Bush
administration and the Federal Reserve announced on Sunday that
they were putting together a support program for Fannie Mae and
Freddie Mac to try to stave off serious troubles for the two
mortgage giants which hold or guarantee more than $5 trillion of
the nation's mortgages, almost half of the total.
Treasury Secretary Henry Paulson is lobbying Congress for quick
approval of the plan that would temporarily empower the government
to extend unlimited lines of credit to Fannie and Freddie and to
buy their stock if needed to bolster their reserves against losses.
The companies' shares have plummeted because of fears about their
financial stability.
All the housing and financial market turmoil has raised fears
that the country could be pushed into a recession, a development
that would prolong the already severe housing correction.
A drop in energy prices over the past three days has raised
hope, however slim, that those fears may be overblown. Oil prices
dropped below $130 a barrel for the first time in more than a month
Thursday and natural gas futures tumbled more than 8 percent. On
Wall Street, stocks shot higher as fuel prices fell.
Over the past few months, Wall Street has rallied before only to
fall again as concerns about the economy have returned.
The prolonged slump in housing remains at the epicenter of the
country's troubles. The National Association of Home Builders
reported this week that builder sentiment fell to an all-time low
in July as demand for new homes weakened further.
"Job-market losses, deepening problems in the finance area and
sinking home values, aggravated by the wave of foreclosures, are
all contributing factors that are keeping potential buyers on the
sidelines," David Seiders, chief economist for the home builders,
said Thursday.
Pat Newport, an economist with Global Insight, predicted that
total housing starts will fall to 933,000 this year, down 33
percent from last year. That total for the year would be the lowest
level since World War II.
The report on housing construction showed that applications for
building permits, considered a good sign of future activity, rose
by 11.6 percent to a seasonally adjusted annual rate of 1.091
million units. This increase was also skewed by a big rise in
applications in New York, however.
Housing construction soared by 102.6 percent in the Northeast,
reflecting the New York City surge, but fell by 12.8 percent in the
Midwest, 9.4 percent in the West and 1.4 percent in the South.
Separately, the Labor Department reported that the number of
newly laid-off people signing up for jobless benefits rose by
18,000 last week to 366,000, the highest level since late June. The
increase was below the number that economists had been expecting.