Martin Crutsinger
USA Today
WASHINGTON — Housing construction plunged to the lowest level in more than six years in October as the nation’s once-booming housing market slowed further.
The Commerce Department said Friday that construction of new single-family homes and apartments dropped to an annual rate of 1.486 million units last month, down a sharp 14.6% from September.
The decline, bigger than expected, was the largest percentage drop in 19 months and pushed total activity down to the lowest level since July 2000.
The level of building activity in October was 27.4% below October 2005, biggest year-over-year decline since March 1991.
Applications for new building permits, seen as a sign of future plans, fell for an eighth month, declining 6.3% to an annual rate of 1.535 million units.
Construction of single-family homes fell 15.9% in October from the seasonally adjusted September level, dropping to an annual rate of 1.177 million units. Construction of multi-family units dropped 9.1% to an annual rate of 309,000 units.
The drop in construction was led by a 26.4% decline in the South. Construction fell 11.7% in the Midwest and 2.1% in the West.
The only region showing strength was the Northeast, where construction jumped 31%.
The sharp slowdown in housing this year stands in stark contrast to the past five years, when the lowest mortgage rates in four decades powered a housing boom that pushed sales of new and existing homes to five consecutive records.
The housing weakness trimmed a full percentage point off economic growth in the July-September quarter, when the economy expanded at a tepid 1.6% rate. Housing is expected to continue acting as a drag over the next year but analysts believe the adverse effects of falling sales and construction cutbacks will not be enough to push the country into a recession.
There were signs that the steep plunge in housing was beginning to level off. The monthly survey of builder sentiment edged up slightly in early November after a small increase in October. It marked the first back-to-back improvements in builder sentiment since June 2005.