February housing construction tumbles as snowstorms depress activity in Northeast and SouthBy Martin Crutsinger, AP
Tuesday, March 16, 2010
Housing construction drops 5.9 pct in February
WASHINGTON — Housing construction fell in February as winter blizzards held down activity in the Northeast and South. The decline highlighted the challenges facing builders as they struggle to emerge from the worst housing slump in decades.
The Commerce Department said Tuesday that construction of new homes and apartments fell 5.9 percent in February to a seasonally adjusted annual rate of 575,000 units, slightly higher than the 570,000 that economists were expecting. January activity was revised up to a pace of 622,000 units, the strongest showing in 14 months.
Economists characterized the February dip as weather-related although they said any housing rebound this year is likely to be modest at best, given a variety of headwinds from record home foreclosures to high unemployment.
“It’s tough when you have massive rain and snow storms over a large part of the nation to get much construction activity,” said Joel Naroff, chief economist at Naroff Economic Advisors. “I am expecting housing to be a modest addition to economic growth for the rest of the year.”
The February weakness reflected a modest 0.6 percent drop in single-family construction, which declined to 499,000 units. The more volatile multifamily sector plunged 30.3 percent to an annual rate of 76,000 units after having surged 18.5 percent in January.
Activity dropped by 9.6 percent in the Northeast and 15.5 percent in the South, two regions hit by snowstorms in February. Building rose by 10.6 percent in the Midwest and 7.9 percent in the West.
Building permits, considered a good barometer of future activity, fell 1.6 percent to an annual rate of 612,000 units, after having fallen a larger 4.7 percent in January.
Paul Dales, an economist at Capital Economics, said the February weakness stemmed from severe winter weather which prevented builders from breaking ground on new projects. But he said the housing outlook remains bleak because of a huge glut of unsold homes, reflecting the weakness in sales and the continued crisis with home foreclosures.
He said that in addition to 3.8 million homes for sale currently, foreclosures could dump another 5 million to 6 million homes on the market.
“Some of this excess may be reduced by a surge in sales ahead of the end of the tax credit, but the bulk is going to take a very long time to work off,” Dales said in a research note.
To qualify for a government tax credit, buyers must sign the purchase contract by the end of April.
In November, the federal government extended a tax credit of up to $8,000 for people who hadn’t owned a home for three years. This credit had helped boost home sales last summer and fall. Seeking to build on that momentum, the government added a new credit of up to $6,500 for current homeowners, hoping it would transform them into house-hunters this winter and spring.
Many economists believe that any new spurt in sales will likely be temporary and the rebound in housing this year will be slow.
“New homes continue to face stiff competition from distressed properties coming on the market at bargain prices,” said Nigel Gault, chief economist at IHS Global Insight.
Housing set records in sales and construction during the boom years but more recently has undergone a painful bust, a downturn which helped push the overall economy into the worst recession since the 1930s.
The National Association of Home Builders reported Monday that its survey of builder sentiment dropped by two points to 15 in March, underscoring the gloom in the housing market.
Builders in the survey said that they were seeing fewer prospective buyers and were feeling less optimistic about the likelihood of sales over the next six months.
Sales of new homes plunged 11 percent to a record low in January, the third consecutive monthly decline. Sales of previously occupied homes were down 7 percent, the sharpest drop since last June.
Rene Oehlerking, marketing director for Salt Lake City-based Garbett Homes, said he believed buyers were anxious to strike deals before the government’s tax credits expire.
Buyers who want to take advantage of the credits must have a signed contract by the end of April, and complete the sale by the end of June.
Oehlerking said sales activity at Garbett Homes, which targets first-time buyers, is on pace to exceed last year’s levels and the builder has ramped up construction, starting 18 homes in January and 26 homes in February.
“We think that people are going to start saying, ‘This stimulus is the real deal and we’d better get under contract,’ ” Oehlerking said.
Vince Napolitano, president of Napolitano Homes, said the bad weather in February hurt construction more than it did sales at his Virginia Beach-based company. He said sales in February improved from the January level with activity looking promising for March as well.
“It was just a terrible month throughout the nation as far as getting into the ground for new homes,” Napolitano said of February. “But even though the weather was bad, people did still manage to come out to new home sites.”
AP Business Writer Adrian Sainz in Miami contributed to this report.
Tags: Construction Sector Performance, Foreclosure Rates, Home Buying, Home Selling, North America, Real Estate, Residential Real Estate, Storms, United States, Us-economy, Washington, Winter Weather