Construction of new homes took a bigger-than-expected plunge in September as builders slashed production again.
A barometer of future building also dropped, falling to the weakest level in more than 25 years. Analysts blamed the renewed swoon on the financial crisis that erupted with force in recent weeks, raising anxieties among potential home buyers and making it harder for builders to get construction loans.
The Commerce Department reported Friday that construction of new homes and apartments dropped 6.3% last month, a much bigger decline than the 1.6% decrease expected. It pushed total production to a seasonally adjusted annual rate of 817,000 units. That’s the slowest pace since January 1991, when the U.S. was in a recession and going through a similar painful housing correction.
“This is pretty bleak. The home building market continues to slide away, and it is not over yet,” said Mark Zandi, chief economist at Moody’s Economy.com. “Demand is now weakening as a result of the financial panic and the hit to the job market.”
The construction declines last month reflected weakness in many parts of the country. It was led by a 20.9% drop in the Northeast, where construction of single-family units fell to the lowest level on record.
Construction slipped 16.8% in the West, with single-family building hitting a record low there too. The Midwest saw a gain of 5.6%, although that came from strength in apartment construction as single-family building also hit a record low in that region. Construction activity in the South was up a slight 0.5%.
Applications for building permits, considered a good sign for future activity, also fell sharply in September, dropping by 8.3% to an annual rate of 786,000 units, the weakest level since November 1981.
Builders have been facing tighter lending standards as they try to get financing for new projects.