USA Today
In this file photo, a construction worker nails plywood to the roof of a new home in Richmond, Va.
WASHINGTON (Reuters) — Construction of new homes fell to a 17-1/2 year low in September and consumer confidence suffered its steepest monthly drop on record in October, according to two economic reports that added to investor pessimism Friday.
The Reuters/University of Michigan Surveys of Consumers said its index of confidence plummeted to 57.5 in October from 70.3 in September.
The University of Michigan confidence index dates back to 1952. Its record low was 51.7, in May 1980.
Consumers rated current economic conditions the worst on record, with this gauge falling to 58.9 from September’s 75.0.
The housing report said the worsening housing slump and growing turmoil in financial markets helped pushed building permits for new construction to a nearly 27-year low.
The Commerce Department said starts on new homes fell 6.3% to a seasonally adjusted annual rate 817,000 units, slowest pace since January 1991 and well below the 880,000 rate economists expected.
The September rate of starts on single-family homes fell 12% to a 544,000-unit annual rate, slowest pace since August 1982.
With falling home prices, soaring foreclosures and financial turmoil curtailing the availability of mortgages for prospective home buyers, builders in September were clearly bracing for a deeper downturn.
Applications for building permits fell 8.3% in September to an annual rate of 786,000.
This was the weakest rate for permits since November 1981, and was below forecasts for an 850,000-unit rate. The rate of new permits was in September was 38.4% below September 2007, while total housing starts for the month showed a 31% drop from a year ago.
“Obviously weaker than expected in terms of the consensus, however it is not necessarily a surprise following yesterday’s resumed drop in home builder sentiment,” said Stephen Malyon, chief currency strategist at Scotia Capital in Toronto. “With mortgage rates once again climbing, housing related numbers are likely to disappoint in the months ahead.”
Construction starts for multifamily units rose 7.5% to an annual pace of 273,000 units. Multifamily permits for future construction, however, fell 16.4% to a 254,000-unit rate.
Single-family home starts in the Midwest, Northeast and West all registered their lowest rate since records started being kept in 1959. The Northeast pace fell 4.8%, the Midwest pace fell 24.1% and the West pace fell 17.7% t. The South’s single-family housing start pace fell 6.3%, slowest pace since January 1991.