The Spokesman-Review Newspaper
The Spokesman-Review Newspaper The Spokesman-Review
Spokane, Washington  Est. May 19, 1883
Current Temperature
45°F
Current Conditions
Overcast clouds
View complete weather report

Color Scheme

Subscribe now

Residential construction rises sharply

A house goes up earlier this month in Palo Alto, Calif. Associated Press (Associated Press / The Spokesman-Review)
Martin Crutsinger Associated Press
A house goes up earlier this month in Palo Alto, Calif. Associated Press (Associated Press / The Spokesman-Review)

WASHINGTON – Construction of new homes increased by the biggest percentage in more than two years in April, a rare spot of good news amid the worst downturn in housing in more than two decades.

Analysts, however, played down the increase, noting that all the strength came from the volatile apartment sector. They said the painful housing slump is far from over as a record flood of foreclosures continues to add to the sizable stockpile of unsold homes.

“It is definitely too early to uncork the champagne on the long and winding road to more healthy housing-market conditions,” said Brian Bethune, an economist at Global Insight. He said he did not expect housing activity to stabilize until the end of this year.

Len Blum, managing director of investment bank Westwood Capital, said the slump in housing will run for another year because of a number of problems, from banks tightening up on lending standards to the reluctance of many people to commit to a home purchase at a time when home prices are still falling.

“I think estimates that we are near the bottom of the housing correction will prove to be overly optimistic,” he said. “We have had a housing bubble and it will take some time to deflate.”

The prolonged two-year slump in housing is occurring after a five-year boom which pushed sales and home prices up to record levels. The correction has proved to be a serious drag on the overall economy, raising worries that the country could be in danger of falling into a recession.

Applications for building permits, considered a good sign of future activity, recorded an increase in April, rising by 4.9 percent to 978,000 units. It was the first gain in permits in five months but it still left permits 20 percent below where they were a year ago.

Economists said housing construction will remain under pressure until builders have more success in reducing a huge backlog of unsold homes, a challenge amid the current economic weakness.

The housing report showed that construction activity was up in most regions of the country in April, rising by 24.4 percent in the Midwest, 18.5 percent in the West and 3.6 percent in the South. However, construction fell by 12.7 percent in the Northeast.

Even with the improvement in April, housing construction nationwide was 30.6 percent below the level of activity a year ago.