WASHINGTON — Builders broke ground on more new homes last month, giving the weak U.S. housing market a slight boost at the start of the spring buying season.
By Scott Olson, Getty Images
Home construction rose 7.2% in March from February to a seasonally adjusted 549,000 units, the Commerce Department said Tuesday. Building permits, an indicator of future construction, rose 11.2% after hitting a five-decade low in February.
Still, the building pace is far below the 1.2 million units a year economists consider healthy. And March’s improvement came after construction fell in February to its second-lowest level on records dating back more than a half-century.
Millions of foreclosures have forced home prices down. In some cities, prices are half what they were before the housing market collapsed in 2006 and 2007. And more foreclosures are expected this year. Tight credit has made mortgage loans tough to get. Many would-be buyers who could qualify for loans are reluctant to shop, fearing prices will fall further.
A sign of the battered industry is the number of new homes finished and ready to sell dropped in March to a seasonally adjusted 509,000 units, lowest on records dating back to 1968. And the number of homes now under construction has fallen to a four-decade low.
Starts on single-family homes, which make up roughly 80% of home construction, rose 7.7% in March. Apartment and condominium construction starts rose 14.7%. Building permits increased to their highest level since December, spurred by a more than 28% jump in permits for apartment and condo buildings.
The increase in home construction was felt in most regions of the country. Starts rose 32.3% in the Midwest, 27.6% in the West and 5.4% in the Northeast. Construction fell 3.3% in the South.
New homes can spur job growth. Each home built creates the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
The trade group said Monday that its index of industry sentiment for April fell one notch, to 16. That followed a one-point increase in March and four straight months of 16 readings. Any reading below 50 indicates negative sentiment about the housing market’s future and the index hasn’t been above that level since April 2006.
Most economists expect home prices — and by extension home sales and construction — to slip even further in 2011 before a modest recovery takes hold.
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