Housing
New-Home Construction On the Increase
By Derek kravitz
Ap Real estate Writer
WAShington (AP) — Builders broke
ground on more new homes last month, giv-
ing the weak housing market a slight boost
at the start of the spring buying season.
Home construction rose 7.2 percent in
March from February to a seasonally adjust-
ed 549,000 units, the Commerce
Department said Tuesday. Building permits,
an indicator of future construction, rose
11.2 percent after hitting a five-decade low
in February.
Still, the building pace is far below the 1.2
million units a year that economists consid-
er healthy. And March’s improvement came
after construction fell in February to its sec-
ond-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 of 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, fear-
ing that prices will fall even further.
condominium construction rose 14.7 per-
cent. Building permits increased to its high-
est level since December, spurred by a more
than 28 percent jump in permits granted for
apartment and condo buildings.
rose 32.3 percent in the Midwest, 27.6 per-
cent in the West and 5.4 percent in the
Northeast. Construction fell 3.3 percent in
the South.
New homes can spur job growth. Each
new home built creates the equiva-
lent 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 read-
ings. Any reading below 50 indicates nega-
tive 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
home sales and constructio to slip even fur-
ther in 2011 before a modest recovery.
Each new home built
creates the equivalent of
three jobs for a year
That increase in permits could signal a
turnaround in the coming months, said
Steven A. Wood, chief economist with
Insight Economics. New homes typically
take six months to build and the number of
new permits is higher than the number of
homes starting construction.
The increase in home construction activi-
ty was felt in most regions of the country. It
The lack of any
meaningful rebound
in housing is stunting
the broader
economic recovery
A sign of the battered industry is the num-
ber of new homes finished and ready to sell
dropped in March to a seasonally adjusted
509,000 units, the lowest level on records
dating back to 1968. And the number of
homes now under construction has fallen to
a four-decade low.
“Housing starts remain at an extraordi-
narily depressed level,” said Dan
Greenhaus, chief economic strategist at
Miller Tabak + Co. “To put this in further
perspective, a doubling of (new homes)
from here would still put starts at the low-
est level of any other recession.” During
previous housing recessions, in the early
1980s and 90s, new home construction fell
to more than 1 million homes per year. This
year’s pace is slightly more than half those
levels.
And the lack of any meaningful rebound
in housing is stunting the broader econom-
ic recovery. In past modern-day recessions,
housing accounted for 15 to 20 percent of
overall economic growth. In the first post-
recession year, between 2009 and 2010,
housing only contributed 4 percent to eco-
nomic growth.
Since the mid-part of last year, home con-
struction and sales have instead detracted
from the economy. Joshua Shapiro, chief
U.S. economist at MFR Inc., said that’s a
“large reason for the sub-par nature” of the
rebound. New-home construction is down 6
percent since the recession ended nearly
two years ago.
Single-family homes, which make up
roughly 80 percent of home construction,
rose 7.7 percent in March. Apartment and
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April 20, 2011 The Portland Skanner page 11