Housing construction hits record low in April

updated 12:40 p.m. ET May 19, 2009

WASHINGTON - A modest rebound in single-family home construction in April raised hopes Tuesday that the three-year slide in housing could be bottoming. But with the supply of unsold homes bulging, foreclosures rising and prices falling, no broad recovery is expected until next spring at the earliest.

The Commerce Department said construction of new homes and apartments fell 12.8 percent last month to a seasonally adjusted annual rate of 458,000 units — the lowest pace on records going back a half-century. Applications for new building permits dropped 3.3 percent to an annual rate of 494,000, also the lowest on record.

All of last month’s weakness, though, came in the volatile multifamily part of construction. Single-family construction and permits both rose, a signal that this bigger sector of home construction is starting to stabilize.

Construction of single-family homes rose 2.8 percent to an annual rate of 368,000, following a 0.3 percent gain in March and no change in February. Building permits for single-family homes were up 3.6 percent to a rate of 373,000 last month.

“U.S. housing remains very weak, but the stability in single-family units is encouraging,” Benjamin Reitzes, an economist at BMO Capital Markets, said in a research note.

Multifamily construction plunged 46.1 percent to an annual rate of 90,000 units after a 23 percent fall in March. Permits for multifamily construction dropped 19.9 percent to 121,000 units.

Analysts said apartment construction is being hurt by a glut of condominiums on the market and by tightening credit conditions for commercial real estate.

They also said a real rebound for single-family construction remains distant as heavy job layoffs and record levels of foreclosures will continue to weigh on this sector.

The number of unsold homes on the market at the end of March fell 1.6 percent from a month earlier to 3.7 million, not including new homes, according to the National Association of Realtors. But since sales remain sluggish, it would take almost 10 months to rid the market of those properties, compared with about 6.5 months in 2006.

“Home building conditions remain weak,” Paul Dales, U.S. economist for Capital Economics, said in a note to clients. “The excess supply of new homes for sale is still high and heavy discounts on foreclosed properties have made new homes less appealing. Any rebound in starts will be modest.”

The nation’s current recession, the longest since World War II, began with a collapse in housing that triggered rising loan losses and the worst crisis in the financial sector in seven decades. The government has provided billions of dollars in support to try to stabilize the financial system and get banks to resume more normal lending to consumers and businesses.

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