Single-family home construction posted a modest rebound in April, raising hopes that the three-year slide in housing is leveling off. But a bulging supply of unsold homes, record levels of foreclosures and still-falling home prices suggest that a sustained recovery isn't likely until next spring at the earliest.
The Commerce Department said yesterday that construction of homes and apartments fell 12.8 percent last month to a seasonally adjusted annual rate of 458,000 units. That's 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 a record low.
All of last month's weakness came in the volatile multifamily part of construction. By contrast, single-family construction and permits both rose, which economists took as a hopeful sign that this bigger sector of home construction is stabilizing.
"I think we have probably reached the low point for this housing crash, but I don't expect us to come roaring back," said Mark Zandi, chief economist at Moody's Economy.com. "I think it will take another year for a recovery in housing to get going."
In the Richmond area, there has been an increase in home sales but not much in home construction.
"Inventory levels are getting eaten up a little bit," said Christopher Corrada, president of the Home Building Association of Richmond and vice president of East West Partners of Virginia Inc., a development firm in Midlothian.
"Even if the market is getting better, the biggest issue builders and developers face is they cannot get loans from banks. Banks are not lending on construction and development," he said.
Many economists say home construction likely will stop falling in the current quarter. But any rebound isn't expected to take hold until next spring, and even then it is likely to be slow. The reasons are the huge overhang of unsold homes, a wave of mortgage foreclosures, and persistent job losses.
With foreclosures and other distressed properties for sale at deep discounts, builders often can't compete. Rather than launching new developments, they are waiting for signs of a broader recovery.
"They're being really cautious," said Michelle Meyer, an economist with Barclays Capital. "It will likely be a pretty gradual recovery in construction."
The government report yesterday showed that 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.
Construction of single-family homes rose 2.8 percent in April to an annual rate of 368,000. That followed a 0.3 percent gain in March and no change in February.
Building permits for single-family homes rose 3.6 percent to a rate of 373,000 last month.
In Richmond area, 367 building permits were issued in the first quarter compared with 960 in the year-earlier period, a 62 percent year-over-year decline, according to Integra Realty Resources Richmond, a real estate research firm.
"We are still experiencing a continuing slowdown in the market," said Tom Tyler, a senior analyst with Integra Realty.
The discrepancy between the national and local figures can be attributed to states such as California, Arizona and Nevada, which went into a housing recession much earlier than this area, he said. They are beginning to recover.
"Bottoming out is also in the cards for us in the not-too-distant future," he said. "The numbers don't show it yet, but we are just about there."
Staff writer Carol Hazard and The Associated Press contributed to this report.
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