Live

Watch CBSN Live

Housing Construction Plummets 10.8 Percent

Housing construction plunged to the second lowest level on record in March, providing a sobering sign that the worst housing slump in decades has not yet ended.

The Commerce Department said Thursday construction of new homes and apartments dropped by 10.8 percent last month to a seasonally adjusted annual rate of 510,000 units. That was the second lowest construction pace on records that go back 50 years.

The decline was worse than economists had expected and February activity was revised lower as well. That is more evidence that the steep slump in housing, which was a major factor triggering the current recession, has yet to run its course.

The Commerce report showed that applications for building permits, considered a good barometer of future activity, also fell in March, dropping 9 percent to an annual rate of 513,000 units. That was lower than the 550,000 rate that economists had been expecting.

The drop in construction in March followed a 17.2 percent surge in February, an unexpected gain that was driven by a big increase in apartment activity, a sector that can be volatile from month to month.

For March, construction of multi-family unites fell by 29 percent following a 62.1 percent rise in February.

Single-family construction was flat in March after a small 0.6 percent rise in February, a development that could be viewed as an encouraging sign that this key part of home building may have started to stabilize, but at a very low level.

The 510,000 unit pace for total construction is the second lowest on government records going back to January 1959. The record low was a 488,000 unit pace set in January.

For March, the biggest decline was an 8.5 percent drop in activity in the Midwest, followed by a 5.5 percent decline in the Northeast. Home construction posted a 4.1 percent rise in the West and a 1.2 percent increase in the South.

The setback in housing starts came after several more upbeat reports showing tentative rebounds in sales and builder sentiment.

The National Associaton of Home Builders reported Wednesday that its guage of builder sentiment posted its biggest one-month jump in five years in April.

While still near historically low levels, the trade association said the index rose five points to 14, its highest reading since October. The trade group includes industry heavyweights such as Centex Corp. and Lennar Corp., as well as hundreds of smaller builders nationwide.