From the Associated Press:
Home construction hits record low
Construction of single-family homes in October skidded to the lowest level in 16 years, although the slide was cushioned somewhat by a rebound in apartment building.
The Commerce Department reported yesterday total housing construction rose 3 percent in October to a seasonally adjusted annual rate of 1.229 million units. But all the strength occurred in a hefty rebound in apartment construction, which is extremely volatile.
The bigger single-family sector actually fell 7.3 percent to an annual rate of 884,000 units, the slowest pace since October 1991, when housing was going through another steep downturn. In another worrisome sign, applications for building permits fell for a fifth straight month.
The current housing slump is expected to worsen further before starting to rebound in the middle of next year. The credit crunch that hit with force in August has caused financial institutions to tighten up on their lending standards, making it harder for prospective borrowers to get home loans.
In addition, some 2 million borrowers who took out “subprime” loans during the peak of the five-year housing boom are now seeing low introductory rates reset to much higher levels, adding $250 to $300 to the typical monthly payment. The concern is that this will fuel a tidal wave of defaults over the next two years, dumping even more unsold homes onto the market.
Analysts predicted that construction activity will slump even further in coming months as builders strive to reduce their inventory of unsold homes. They noted applications for new building permits, considered a good barometer of future activity, fell 6.6 percent to an annual rate of 1.178 million units.