Home construction plunged last month to the lowest level in the US since October last year as the economy remained weak and demand for housing plummeted.
However, driving last month’s decline was a more than 20 percent drop in condominium and apartment construction, which makes up a small but volatile portion of the housing market.
Construction of single-family homes, the largest part of the market, was down slightly. It dropped 0.7 percent.
PHOTO: EPA
Overall, construction of new homes and apartments last month fell 5 percent from a month earlier to a seasonally adjusted annual rate of 549,000, the US Department of Commerce said on Tuesday. May’s figure was revised downward to 578,000.
Homebuilders are struggling to compete with a glut of homes on the market, many of them foreclosures or deeply discounted properties.
The number of foreclosures could rise even faster, according to a new report on the US government’s flagship effort to help those at risk of losing their homes. More than 40 percent of those of those who have enrolled have dropped out of the program, the US Department of Treasury said on Tuesday.
A slumping job market and competition from foreclosed properties have forced builders to limit construction, especially after tax credits that spurred sales expired at the end of April.
“The housing market remains the Achilles heel of the recovery,” said M. Cary Leahey, a senior economist at Decision Economics. “It is hard to imagine confidence recovering to healthy levels until the housing market experiences much less distress.”
In a typical economic recovery, the construction sector provides much of the fuel. Not this time. While developers have cut back on construction and the number of new homes on the market has fallen dramatically, they still must compete against foreclosed homes selling at deep discounts.
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