New Home Construction Hits 17 Year Low

WASHINGTON –Builders in the United States broke ground on the fewest houses in 17 years in July, the Commerce Department said Tuesday.
The 11% decrease, to an annual rate of 965,000, the lowest since March 1991, followed a revised 1.084 million pace the prior month, the Commerce Department said. July's level was higher than economists anticipated. Building permits, a sign of future construction, also fell.
"There's still a lot of excess inventory," Michelle Meyer, an economist at Lehman Brothers, said before the figures were released.
"Foreclosures are competing with builders, and that will keep builders on the sidelines for a while."
Starts were projected to fall to a 960,000 annual pace from a previously estimated 1.066 million in June, according to the median forecast of 77 economists polled by Bloomberg News. Estimates ranged from 875,000 to 1.09 million.
Compared with July 2007, work began on 30% fewer homes.
Permits fell 18%, to a 937,000 annual pace, lower than the median survey projection of a 970,000 rate.
Construction of single-family homes fell 2.9%, to a 641,000 rate, the fewest since January 1991. Work on multifamily homes dropped 24%, to an annual rate of 324,000.
The decrease in starts was led by a 30% decline in the Northeast. Construction fell 8.2% in both the South and West. Starts in the West slumped to a 26-year low. The Midwest showed a 10% gain.
The magnitude of the July drop in the Northeast reflected, in part, a payback from an unexpected surge the prior month.
Starts and permits jumped in June as builders hurried to break ground ahead of new regulations in New York City's building code that took effect July 1.
Demand is generally weakening. Sales of existing homes fell to a 10-year low in the second quarter, according to the National Association of Realtors. A third of all sales were foreclosures or short sales, in which lenders take a loss on a property.
Financing is also becoming scarce, according to a quarterly survey of banks by the Federal Reserve Board. More of the loan officers reported they tightened standards on prime mortgages and nontraditional loans than in the April survey.
The five largest U.S. home builders reported a combined $1.08 billion of losses in their most recent fiscal quarters.
Builders are pessimistic as losses mount. The National Association of Home Builders/Wells Fargo sentiment index, released Monday, showed optimism held at a record low in August for a second month.