Builders take break as home construction falls
Nationwide, home building in October was more than 27 percent below the level of activity a year ago. The South , and especially Florida, has been hit hard .
By TIMES STAFF AND WIRE REPORTS
Published November 18, 2006
WASHINGTON - Housing construction plunged in October as builders slashed activity to the lowest level in more than six years. The drop was particularly steep in the South, where construction fell 26 percent from September levels.
Wachovia Bank senior economist Mark Vitner said problems in the new housing markets in Florida and suburban Washington, D.C., hurt the numbers for the South, as did a lot of bad weather in the region last month.
"Florida builders really clamped down on new construction in October and switched their attention to cleaning out inventories," he said. "I haven't run into an optimistic builder in the last couple of months. Most tell me that things are worse than our numbers are indicating because they're still seeing large numbers of cancellations."
Nationally, construction of new single-family homes and apartments dropped 14.6 percent to an annual rate of 1.49-million units, the slowest pace since July 2000.
The news was even more stark for building permits, which fell for a record ninth consecutive month, dropping 6.3 percent to an annual rate of 1.54-million units, the slowest pace in nine years.
"A tornado hit the housing sector in October," said Joel Naroff, chief economist at Naroff Economic Advisors, a private forecasting firm. "Builders have seen the light from the housing market meltdown and are now moving as rapidly as possible to reduce supply."
October numbers on new construction aren't available yet for the Tampa Bay area, but the September numbers were grim. The number of new building permits issued was down 28 percent from August and 60 percent from September 2005, according to the most recent Census Bureau statistics available.
Vitner said he doesn't expect the Florida housing market to bottom out for another six months or so.
However, the Pinellas Realtor Organization said Friday that it sees some positive signs: Existing home sales in October were up 0.6 percent from September, although still down 41 percent from a year ago. Condo sales volume was down 8 percent from September and 58 percent from a year ago. Prices held steady.
Housing, which had been one of the economy's standout performers during a five-year boom, shaved about a percentage point off growth in the July-September quarter. That pushed overall economic activity as measured by the gross domestic product down to an anemic rate of just 1.6 percent, the slowest growth in more than three years.
Many economists predicted that GDP growth would be trimmed by a similar amount in the current quarter as housing continues to act as a drag, through lower sales and reduced building activity. Construction in October stood 27.4 percent below the level of activity a year ago, the biggest year-over-year decline in more than 15 years.
"The scale of the yearly decline is now in housing recession territory," said Brian Bethune, chief economist at Global Insight, a Lexington, Mass., forecasting firm.
With inventories of unsold new and existing homes near record levels, many analysts said the slump in housing was likely to last for a number of more months, possibly until the middle of next year.
But some economists noted some faint hints of a turnaround. A monthly survey of builder sentiment conducted by the National Association of Home Builders was up in November for the second straight month, the first back-to-back gains since mid 2005.
David Seiders, chief economist for the builders' group, said he still believed what was occurring was a correction in the housing market with builders moving aggressively to cut back on production and move finished homes by offering a raft of incentives.
Construction of single-family homes fell by 15.9 percent in October from the seasonally adjusted September level, dropping to an annual rate of 1.18- million units. Construction of multifamily units dropped by 9.1 percent to an annual rate of 309,000 units.
The drop in construction was led by a 26.4 percent decline in the South. Construction fell by 11.7 percent in the Midwest and 2.1 percent in the West.
The only region showing strength was the Northeast, where construction jumped by 31 percent.
Times staff writer Helen Huntley contributed to this report.