WASHINGTON – Housing construction plunged to a record low in April as a steep drop in apartment building offset a rebound in single-family construction. Permits for new projects also hit a new low.
The Commerce Department said Tuesday that construction of new homes and apartments fell 12.8 percent last month to a seasonally adjusted annual rate of 458,000 units, the lowest pace on records going back a half-century.
In a disappointing sign for the future, applications for new building permits dropped 3.3 percent to a new record low annual rate of 494,000.
Economists had expected home construction and building permits to post modest increases in April as signs that the worst collapse in housing activity in the post-World War II period was drawing to a close.
Even in last month's big decline, there were some signs of stabilization. Construction of single-family homes rose 2.8 percent to an annual rate of 368,000, following a 0.3 percent gain in March and no change in February. The stability in single-family construction likely will be viewed as a hopeful sign that the three-year slide in housing could be bottoming out.
The weakness last month came in the more volatile multifamily sector where construction plunged 46.1 percent to an annual rate of 90,000 units after a 23 percent fall in March.
Housing construction fell 30.6 percent in the Northeast, the largest drop for any region. Housing starts dropped 21.4 percent in the Midwest and 21.1 percent in the South.
The West was the only region showing strength with a 42.5 percent jump in housing starts.
The National Association of Homebuilders reported Monday that its survey of builder confidence increased for the second straight month in May, reflecting growing optimism on the part of many builders.
The Washington-based trade group's index rose two points to 16, the highest reading since September. Even with the rebound, the index remains near historic lows. Index readings lower than 50 indicate negative sentiment about the market.
Still, private economists viewed rising builder sentiment as an encouraging sign.
"Record high affordability, record low mortgage rates and the government's efforts to jump start economic growth are giving potential buyers optimism to step in and take a look around," said Jennifer Lee, an economist with BMO Capital Markets.
But analysts cautioned that the wave of foreclosures hitting the market means that builders still face tough competition to sell new homes.
The nation's top three homebuilders reported financial results earlier this month that give little hope the spring selling season will be strong enough to stop the red ink.
Pulte Homes Inc. and Centex Corp., which agreed to combine this year to become the largest U.S. homebuilder, said that while their quarterly losses narrowed, they continued to be battered by falling prices and a glut of unsold homes.
D.R. Horton Inc., currently the industry's No. 1 home builder, also reported that its losses had shrunk, but the company said it still faces challenges from foreclosures, high inventory levels, tight homebuyer credit, low consumer confidence and job losses.