Martin Crutsinger
USA Today
WASHINGTON — Construction of new homes plunged to a record low in January as all parts of the country showed big declines in building, but mortgage applications jumped in the most recent week as rates dropped.
The Commerce Department says construction of new homes and apartments dropped 16.8% last month to a seasonally adjusted annual rate of 466,000 units. That’s well below the 530,000 units economists expected, and was the slowest pace on records dating back a half-century.
Applications for building permits, considered a barometer of future activity, also dropped to a record low, falling 4.8% to a rate of 521,000 units, slightly below economists’ expectations.
While the news isn’t good for the construction or real estate industries, the low level of new-home construction should help reduce the backlog of unsold homes over time.
Compared with January 2008, housing starts were off a record 56.2% and permits plunged 50.5%. Completions slumped a record 41.7%.
In the mortgage market, applications soared last week as fixed mortgage rates dropped below the key 5% level, and demand for refinancings surged.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity jumped 45.7% to 875.3 the week ended Feb. 13. It was the highest reading since Jan. 16, and coincided with a 0.2 percentage point drop in average 30-year mortgage rates to 4.99%, the MBA said.
The MBA’s refinancing index climbed 64.3% to 4,472.9. The gauge of loan requests for home purchases rose 9.1% to 257.3, the MBA said.
In a third report Wednesday, the Federal Reserve said industrial production took a bigger-than-expected nosedive in January, largely reflecting shutdowns at plants making automobiles and related parts.
The report say production at the nation’s factories, mines and utilities fell 1.8% last month. Economists expected a 1.5% decline.
The continued weakness in home construction underscores the problems facing the housing industry, which is in the grips of the worst slump since World War II. Troubles in housing have pushed the country into a recession and also triggered the worst financial crisis in seven decades as banks struggle to cope with billions of dollars of losses in mortgages and other types of loans.
The new housing figures were released on the same day President Barack Obama is scheduled to announce his administration’s plan to reduce home foreclosures.
More than 2 million American homeowners faced foreclosure last year, and that number could soar as high as 10 million in the coming years depending on the severity of the recession, according to a report last month by Credit Suisse.
The new report said construction dropped 42.9% in the Northeast to a record low of 36,000 units at an annual rate. Building fell 29.3% in the Midwest to a record low 53,000 units, while it dropped 12.8% in the South to a new record low 246,000 units.
Construction activity fell 6.4% in the West to an annual rate of 131,000 units, slowest pace since October 1966.
The National Association of Home Builders on Tuesday said that its housing market index rose to nine this month, climbing one point off an all-time low as improved traffic by prospective buyers helped lift some builders’ confidence in future sales. Still, readings lower than 50 indicate negative sentiment about the market.
For all last year, the number of housing units builders started totaled 906,200, also a record low. That was down from 1.36 million units started in 2007. The previous low was set in 1991.
Contributing: Reuters
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