U.S. Housing Starts Rise 7.2 Percent
U.S housing starts jumped in March, providing a slight boost to the nation's beleaguered housing market at the start of the vital spring buying season. Home construction increased 7.2 percent from February to a seasonally adjusted annual pace of 549,000 units in March, the Commerce Department reported. Building permits, meanwhile, considered a barometer of future construction activity, climbed 11.2 percent after hitting a fifty year low in February.
While Tuesday's news is encouraging, the 549,000 unit pace is still well below the 1.2 million pace that economists say s indicative of a healthy market. And an improvement in March was almost guaranteed after the near-historic lows set the previous month. Prices are still very much depressed across the nation as millions of foreclosures and other distressed properties continue to drift onto the market. In many areas, prices are still just half what they were prior to the market collapse in 2006 and 2007.
Moreover, foreclosures are expected to continue this year. Stricter lending standards have made loans tougher to get, and many potential buyers are remaining on the fence for fear of prices falling even further. A clear indicator of just how bad it's gotten is that the number of new homes finished and ready to sell has fallen to a seasonally adjusted 509,000 units, the lowest level on records dating back to 1968. And the number of homes currently under construction has fallen to a forty-year low.
In previous housing downturns, in the early 80s and 90s, new home construction remained above a 1 million unit pace, whereas this year's pace is just over half of that level. Housing also appears, meanwhile, to be hindering the overall economic recovery. In prior recessions, housing was estimated to have accounted for 15 to 20 percent of overall economic growth. In contrast, between 2009 and 2010 housing contributed just 4 percent of U.S. economic growth.
Overall, new home construction is down 6 percent from when the recession ended, nearly two years ago. Single-family homes, which account for about 80 percent of new home construction, rose 7.7 percent in March, while apartment and condominium construction increased 14.7 percent. Building permits rose to their highest level since December, fueled by a 28 percent increase in requests for permits to build apartment and condo buildings.
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