Builders broke ground on more new homes last month, giving the weak U.S. housing market a slight boost at the start of the spring buying season.
Home construction rose 7.2 percent in March from February to a seasonally adjusted 549,000 units. Building permits, an indicator of future construction, rose 11.2 percent after hitting a five-decade low in February.
Still, the building pace is far below the 1.2 million units a year that economists consider healthy. And March’s improvement came after construction fell in February to its second-lowest level on records dating back more than a half-century.
Millions of foreclosures have forced home prices down. In some cities, prices are half of what they were before the housing market collapsed in 2006 and 2007. And more foreclosures are expected this year. Tight credit has made mortgage loans tough to get. Many would-be buyers who could qualify for loans are reluctant to shop, fearing that prices will fall even further.
The increase in home construction activity was felt in most regions of the country. It rose 32.3 percent in the Midwest, 27.6 percent in the West and 5.4 percent in the Northeast. Construction fell 3.3 percent in the South.
New homes can spur job growth. Each new home built creates the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
A sign that an economic recovery is slowly getting underway is evident by figures from one of the most deeply impacted industries during the recession — the construction industry.
November marked a third consecutive month with construction spending up. Development of new homes, along with an increase in government funding for federal construction projects, is giving the badly beaten construction industry a boost. The New Year is starting with some optimism, following a very bleak summer.
The Commerce Department says construction spending increased 0.4 percent in November to an annual rate of 810 billion dollars. That’s the highest level since last June. Construction, especially of new homes, suffered greatly due to the recession. Building activity is now just 2.3 percent higher than in August, when it dropped to its lowest level in a decade.
With signs of an economic turnaround taking shape, home buyers who are eligible can take advantage of very attractive mortgage rates, with a bit more confidence that the nation’s economy will improve going forward.
Analysts are still cautious, as government spending is likely to drop in the second half of 2011. Government projects may wind down as the new Congress looks to cut back due to tremendous budget deficits.
Some economists think homebuilding activity has finally hit bottom, and a sustained recovery is still some time off into the future. A big challenge for a sustainable recovery involves the banks. Builders continue to have difficulties obtaining financing for projects as banks have tightened credit standards in response to high default rates.