WASHINGTON — Builders began work on fewer homes than forecast in August, showing an industry that’s languishing more than two years into the U.S. economic recovery.
Housing starts dropped 5 percent to a three-month low 571,000 annual rate, Commerce Department figures showed Tuesday in Washington. The median forecast in a Bloomberg News survey called for a 590,000 pace. Construction slumped in the Northeast during August, when Hurricane Irene battered the region. Building permits, a proxy for future construction, unexpectedly climbed.
Foreclosures, declining prices and a lack of employment are hindering construction and holding back an industry that’s typically helped spark economic rebounds from past recessions. Tighter lending standards and reductions in homeowner equity mean fewer buyers are able to take advantage of record-low mortgage rates .
“The housing market is still in the doldrums,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York. “We still have a huge oversupply, and that’s the problem we need to address before trying to stimulate any housing demand.”
Concern over housing and this year’s growth slowdown may prompt Federal Reserve policymakers to propose new measures to bolster the economy when they conclude their two-day meeting today.
Fed Chairman Ben Bernanke warned last month during a speech in Jackson Hole, Wyo., that the central bank alone can’t lift sagging home prices or mitigate a wave of home foreclosures.
New construction of single-family houses decreased 1.4 percent to a 417,000 rate in August from the prior month. Work on multifamily homes, such as townhouses and apartments, slumped 13.5 percent to an annual rate of 154,000.
“High unemployment and volatile financial markets continue to undermine consumer confidence in spite of low mortgage rates,” Patricia Bedient, chief financial officer at Weyerhaeuser Co., said Sept. 15. “New home markets softened noticeably four to six weeks ago in response to weak employment data and political discord in Washington.”
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