Home construction plunged last month to the lowest level since October as the economy remained weak and demand for housing plummeted, the Associated Press reported.
But driving the June decline was a more than 20 percent drop in condominium and apartment construction, which makes up a small but volatile portion of the housing market. Construction of single-family homes, the largest part of the market, was down slightly. It dropped 0.7 percent.
Overall, construction of new homes and apartments in June fell 5 percent from a month earlier to a seasonally adjusted annual rate of 549,000, the Commerce Department said Tuesday. May’s figure was revised downward to 578,000.
Homebuilders are struggling to compete with a glut of homes on the market, many of them foreclosures or deeply discounted properties.
The number of foreclosures could rise even faster, according to a new report on the Obama administration’s effort to help those at risk of losing their homes. More than 40 percent of those of those who have enrolled have dropped out of the program, the Treasury Department announced.
One bright area of the new home construction report was an increase in building permit applications, which are a sign of future activity. They rose 2.1 percent from a month earlier to an annual rate of 586,000, however this was also driven by apartment construction.
A slumping job market and competition from foreclosed properties have forced builders to limit construction, especially after tax credits that spurred sales expired at the end of April.
In a typical economic recovery, the construction sector provides much of the fuel. Not this time. While developers have cut back on construction and the number of new homes on the market has fallen dramatically, they still must compete against foreclosed homes selling at deep discounts.
Builders may be turning their attention away from new projects to complete those already in progress. Housing completions rose 26.2 percent in June, noted John Ryding and Conrad DeQuadros, economists at RDQ Economics. That could be a positive sign for future activity.
Still, builders have been feeling increasingly pessimistic of late. The National Association of Home Builders said that its monthly reading of builders’ sentiment about the housing market sank to 14 – the lowest level since March 2009. Readings below 50 indicate negative sentiment about the market.
The rate of home building is still up about 15 percent from the bottom in April 2009, though it’s down 76 percent from the last decade’s peak in January 2006. More information on housing statistics is also available at: www.housingeconomics.com.
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