The August figures from the Commerce Department show that builders began work on a seasonally adjusted annual rate of 571,000 homes last month, a 5% decline from July and a three month low. That's less than half the 1.2 million homes that economists say is consistent with healthy housing markets.
Single family homes, which represent roughly two thirds of home construction, fell 1.4%. Apartment building plunged 12.4%. Hurricane Irene slowed construction in the Northeast, analysts said.
Building permits, a gauge of future construction, increased 3.2%. Jennifer Lee, senior economist at BMO Capital Markets, said the increase was an ‘encouraging morsel’ in an otherwise disappointing report.
Home construction is down nearly 6% over the last year, but permits are up nearly 8%. That suggests builders aren't working on new homes but may be preparing to start dormant projects when the economy improves.
Builders typically begin construction on single family homes within six months after getting a permit. With apartment projects, the lag time can be as much as a year.
Construction fell to its lowest levels in 50 years in 2009, when builders began work on just 554,000 homes. Last year was not much better, and this year is shaping up to be just as bad.
Although home construction represents a small portion of the housing market, it has an outsize effect on the economy. Each home built creates an average of three jobs for a year and about $90,000 in taxes, according to the National Association of Home Builders.
