Construction of single-family and multi-family homes fell to a seasonally adjusted annual rate of 479,000 in February, the lowest level since April 2009, the Commerce Department reported. That’s down 22.5 percent from January, the largest monthly plunge since 1984.
Meanwhile, fewer builders pulled permits in February, suggesting that construction is unlikely to pick up soon. Building permits were at a seasonally adjusted annual rate of 517,000, the lowest level since the government began tracking the numbers in 1960.
The results suggest that builders lack the incentive to break ground given the stiff competition they face from the excess supply of existing homes — particularly the deeply discounted foreclosures that are flooding the national housing market.
“Until the market works through the overhang, there’s no need to ramp up production,” said Michael Larson, an analyst at Weiss Research. “The February numbers underscore the fact that new-home builders are at a steep competitive disadvantage.”
This week, a survey by the National Association of Home Builders showed that builder confidence edged up this month. But the group also said that the excess supply of foreclosures, appraisals that are coming in below construction costs, and tough lending standards for buyers and builders continue to hamper the new-homes market.
“There are just too many uncertainties out there for most builders and buyers to comfortably move forward with a new-home project at this time,