Housing Construction Hits 17-Year Low

CNN Money reports:

Construction of new homes and apartments fell to its lowest level in 17 years last month, showing the country is still gripped by a severe housing downturn that has triggered billions of dollars of losses and is reshaping the structure of U.S. finance.

The Commerce Department reported Wednesday that housing construction dropped a surprise 6.2% last month to a seasonally adjusted annual rate of 895,000 units. That's the slowest building pace since January 1991, another period when housing was going through a painful correction.

The decline is larger than the 1.6% drop analysts expected and showed weakness in all the country except the West. ...

For August, the 6.2% drop in housing construction reflected a 1.9% decline in single-family construction, which fell to an annual rate of 630,000 units. Construction of multifamily units fell by 15.1% to an annual rate of 265,000 units. ...

Building activity was down in all parts of the country outside of the West. Construction fell by 14.5% in the Northeast and was down 13.6% in the Midwest and 7.4% in the South.

All the declines left construction activity 33.1% below the level of a year ago. Analysts believe that construction will continue falling for many more months as builders struggle to reduce the backlog of unsold new homes in a market that continues to slump.

Building permits, considered a good indicator of future activity, dropped 8.9% in August to an annual rate of 854,000 units.