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U.S. housing starts dip to 17-year low

August 19, 2008

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CHRISTOPHER S. RUGABER

THE ASSOCIATED PRESS

WASHINGTON – The U.S. government says that construction of homes and apartments in the United States fell in July to the lowest level in more than 17 years.

The Commerce Department said that builders broke ground on 965,000 housing units on an annualized basis. That was down from a pace of 1.08 million in June and the weakest showing since March 1991.

However, July's performance was better than analysts expected. Wall Street economists forecast that housing starts would drop to a pace of 950,000.

Still, the latest housing figures continue to show a badly battered housing market, one of the biggest problems plaguing the already shaky national economy.

The report showed that construction of single-family homes in July fell by 2.9 per cent to a pace of 641,000. That was the lowest since January 1991, when the economy also was in distress.

Construction of apartments and other multi-family dwellings also fell sharply in July, after a large jump in the previous month due to a change in New York City's building codes. That change, which went into effect July 1, gave a rare lift to overall housing construction in June.

Housing permits in July fell to a rate of 937,000, a 17.7 per cent drop from June, but still above analysts' expectations of 925,000. Permits are considered a reliable sign of future activity.

Home builders are hoping the housing rescue package approved by Congress last month will boost the dismal real estate sector. The law includes a temporary $7,500 tax credit for first-time homebuyers that essentially works out to a 15-year, interest-free loan.

The National Association of Home Builders/Wells Fargo housing market index, released Monday, remained at a record low of 16 in August for the second consecutive month. Readings below 50 indicate negative sentiment about the market.

But one measure of longer-term sentiment improved slightly: a measure of builders' sales expectations in six months rose two points to 25.

Still, home builder Toll Brothers Inc. reported dismal quarterly results last week when its revenue fell 34 per cent and its order backlog plunged 52 per cent.

Shares of several home builders, including Toll Brothers, D.R. Horton Inc. and Pulte Homes Inc., dropped Monday, partly due to renewed fears about the financial health of mortgage giants Fannie Mae and Freddie Mac.