Construction of homes dips 5.9%
Severe weather blamed; prospects for year uncertain
WASHINGTON — Housing construction fell in February as 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 yesterday that construction of 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 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 surging 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 4.7 percent in January.
Paul Dales, an economist at Capital Economics, agreed that the February weakness stemmed from severe winter weather. But he said the housing outlook remains bleak because of a large 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.
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.
To qualify for the credit, however, buyers must sign the purchase contract by the end of April.
“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.