Housing news gloomy

Associated Press

July 18, 2008

WASHINGTON - A beat-the-deadline rush to file permits for apartment construction in New York City lifted housing starts to unexpectedly high levels in June, but it was no cause for rejoicing. Construction of single-family homes nationwide fell to the slowest pace in 17 years.

Builders started work on single-family homes at an annual rate of 647,000 units last month, 5.3 percent fewer than in the previous month, the Commerce Department reported yesterday. It marked the slowest pace for singe-family activity since January 1991, another period when housing was going through a severe downturn.

That decline in single-family construction was in contrast to a 42.5 percent surge in apartment construction, an increase that was attributed to a change in New York City building codes that triggered a rush by builders to take out applications before new regulations took effect July 1.

Because of the way the government presents the housing statistics, a big increase in one area can greatly influence the overall figure as the change for one month is multiplied by 12 to get an annual figure.

With the big surge in apartment construction in New York, total construction rose 9.1 percent to a seasonally adjusted annual rate of 1.066 million units, 26.8 percent fewer than a year ago. Economists said they expect the slide to resume in coming months.

The housing industry, which has been in a slump for more than two years, is struggling to cope with record levels of unsold homes.

That glut is being expanded by swelling foreclosures, which are dumping even more houses onto the market.

Would-be buyers are reluctant with prices still falling fast, and those ready to commit are having trouble qualifying for loans as lenders tighten standards.

The prolonged slump in housing remains at the center of the country's economic turmoil. The National Association of Home Builders reported this week that builder sentiment fell to an all-time low this month as demand for new homes weakened further.

Pat Newport, an economist with Global Insight, predicted that housing starts will fall to 933,000 this year, 33 percent fewer than last year. That would be the lowest level since World War II.

The report on housing construction showed that applications for building permits, considered a good indicator of future activity, rose 11.6 percent to a seasonally adjusted annual rate of 1.091 million units. That increase also was skewed by a big rise in applications in New York. Housing construction soared 102.6 percent in the Northeast, reflecting the New York City surge, but fell 12.8 percent in the Midwest, 9.4 percent in the West and 1.4 percent in the South.

Separately, the Labor Department reported that the number of newly laid-off people signing up for jobless benefits rose 18,000 last week to 366,000, the highest level since late June. Economists had expected a bigger increase.