Saturday, October 23, 2010

NEW CONSTRUCTION: Home building rises slightly, but market’s still weak

WASHINGTON — Home construction rose slightly last month, but the market was still too weak to propel growth in the battered industry.

Construction of new homes and apartments rose 0.3 percent from August to a seasonally adjusted annual rate of 610,000, the Commerce Department said yesterday. It was the strongest report on home construction since April.

Housing starts are up 28 percent from their bottom in April 2009. Still, they are down 73 percent from their peak in January 2006, and they are 40 percent below the 1 million annual rate that analysts say is consistent with a healthy housing market.

The industry is “showing signs of stabilization and perhaps even a faint pulse,’’ wrote Joshua Shapiro, chief US economist at MFR Inc.

Construction was driven by a 4.4 percent monthly increase in single-family homes, the second consecutive increase for this category, which represents about 80 percent of the market.

Construction of condominiums and apartments fell by nearly 10 percent.

The number of building permits issued for homes, a sign of future activity, fell 5.6 percent from a month earlier to a seasonally adjusted annual rate of 539,000. That drop, however, was driven by a 20 percent decline in permits for condominiums and apartments. Permits for single-family homes rose 0.5 percent.

That small increase, however, suggests “meaningful strength in the immediate future will not be forthcoming,’’ Dan Greenhaus, chief economic strategist at Miller Tabak, wrote to clients.

High unemployment, slow job growth, and tight credit have kept people from buying homes. The housing market suffered its worst summer in more than 10 years, despite the lowest mortgage rates in five decades.

Weak sales mean fewer jobs in the construction industry, which normally helps power economic recoveries.

Builders remain pessimistic about the housing market, although their mood has improved slightly since summer. The National Association of Home Builders said Monday that its monthly index of builders’ sentiment rose in October to 16, the first increase in five months.

Still, a reading below 50 indicates negative sentiment about the market.

This fall’s home sales may improve, but not by much. A huge backlog of foreclosed properties is dominating the market and providing competition for builders.

Construction activity rose 3 percent in the Northeast 5 percent in the South. It was down by 8 percent in the Midwest and 4 percent in the West.

Alan Zibel Associated Press October 20, 2010

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