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Multifamily homebuilding sets dismal pace

Construction worker Ed McKinnor continues work April 24 on a newly built home that recently sold in Springfield, Ill. The Commerce Department reported construction of new homes and apartments fell 12.8 percent last month to the lowest pace on records going back a half-century.   AP Photo by Seth Perlman

Construction worker Ed McKinnor continues work April 24 on a newly built home that recently sold in Springfield, Ill. The Commerce Department reported construction of new homes and apartments fell 12.8 percent last month to the lowest pace on records going back a half-century. AP Photo by Seth Perlman

Martin Crutsinger
AP Economics Writer

Washington — A modest rebound in single-family home construction in April raised hopes Tuesday the three-year slide in housing could be bottoming.

But with the supply of unsold homes bulging, foreclosures rising and prices falling, no broad recovery is expected until next spring at the earliest.

The Commerce Department reported construction of new homes and apartments fell 12.8 percent last month to a seasonally adjusted annual rate of 458,000 units — the lowest pace on records going back a half-century. Applications for new building permits dropped 3.3 percent to an annual rate of 494,000, also the lowest on record.

All of last month’s weakness, though, came in the volatile multifamily part of construction. Single-family construction and permits both rose, a signal that this bigger sector of home construction is starting to stabilize.

Construction of single-family homes rose 2.8 percent to an annual rate of 368,000, following a 0.3 percent gain in March and no change in February. Building permits for single-family homes were up 3.6 percent to a rate of 373,000 last month.

Multifamily construction plunged 46.1 percent to an annual rate of 90,000 units after a 23 percent fall in March. Permits for multifamily construction dropped 19.9 percent to 121,000 units.

Analysts said apartment construction is being hurt by a glut of condominiums on the market and by tightening credit conditions for commercial real estate. They also said a real rebound for single-family construction remains distant as heavy job layoffs and record levels of foreclosures will continue to weigh on the sector.

The number of unsold homes on the market at the end of March fell 1.6 percent from a month earlier to 3.7 million, not including new homes, according to the National Association of Realtors. But since sales remain sluggish, it would take almost 10 months to rid the market of those properties, compared with about 6.5 months in 2006.

Housing construction and sales are expected to bottom out in the second half of this year, but economists are forecasting prices will keep falling until next spring.

The median price of a new home sold in March was $201,400, down 23 percent from a peak of $262,600 two years earlier. The median price is the midpoint, which means half of the homes sold for more and half for less.

In April, housing construction fell 30.6 percent in the Northeast, the largest drop for any region. Housing starts dropped 21.4 percent in the Midwest and 21.1 percent in the South.

The West was the only region showing strength with a 42.5 percent jump in housing starts.

The National Association of Homebuilders reported Monday its survey of builder confidence increased for the second straight month in May, reflecting growing optimism on the part of many builders.

The Washington-based trade group’s index rose two points to 16, the highest reading since September. Even with the rebound, the index remains near historic lows. Index readings lower than 50 indicate negative sentiment about the market.

The housing slump has affected related industries such as home remodeling, but two nationwide chains reported better-than-expected earnings this week.

Home Depot Inc. said Tuesday its first-quarter profit climbed 44 percent on fewer charges, and the nation’s largest home improvement retailer beat Wall Street’s expectations despite lower sales. Smaller rival Lowe’s Cos. on Monday reported a quarterly profit that also beat analysts’ expectations and the company boosted its full-year outlook.

But the nation’s top three homebuilders reported financial results earlier this month that give little hope the spring selling season will be strong enough to stop the red ink.

Pulte Homes Inc. and Centex Corp., which agreed to combine this year to become the largest U.S. homebuilder, reported while their quarterly losses narrowed, they continued to be battered by falling prices and a glut of unsold homes.

D.R. Horton Inc., the industry’s No. 1 homebuilder, also reported its losses had shrunk, but the company reported it still faces challenges from foreclosures, high inventory levels, tight homebuyer credit, low consumer confidence and job losses.

AP Real Estate Writer Alan Zibel contributed to this report.

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