Construction Spending Remains Dismally Low

Construction spending lagged seriously behind the rest of the economy in the last quarter. Weakness in the construction market has yet to abate. In February, construction spending fell to levels not seen since the fall of 1999. Foreclosures and short sales are the primary culprit, as they stifle new home construction, the traditional driver for the entire industry. Post resource – Construction sector continues to hold back more robust recovery by MoneyBlogNewz.

Building is bad in February

It has been years since the number of projects breaking ground in a month was as low as it was in February. There were fewer homes, apartments and government projects being started. Construction spending in February dropped 1.4 percent; it was the 3rd straight month of decline. construction spending was at $760.8 billion in February as a seasonally adjusted annual rate. That is the worst since October 1999 the spending has been at. While other sectors of the U.S. economy have been showing signs of life, construction has been holding back a more robust economic recovery. There are fewer companies wanting to build office buildings, hotels and purchasing centers nevertheless even though the recession is over. Still, the construction sector has to deal with this. In February, the level of activity went to half of the $1.5 trillion healthy construction market level. This is what economists consider healthy. The housing bubble that caused the recession won’t recover for four more years, in accordance with estimation.

Troubles in housing market contain construction of new homes

Private residential construction fell 3.7 percent in February to an annualized rate of $228.5 billion. Because of the foreclosures and unsold homes, there were less single-family and multi-family homes created. Home inventory needs to go down to help new home construction. This is the only way it will get better. There was a 3 percent drop in existing home sales past year with a 28 percent drop in new home sales, reports the National Association of Realtors. New home sales went down from 301,000 to 250,000, a 16.9 percent decrease, in February which is the lowest level since 1963 when the government started keep track.

Buying and building are both down

The GDP bottom line is driven by new home sales in construction. The National Association of Realtors states that right now, buying a new home is about 29 percent more expensive than an existing home, which isn't normal. The existing home industry continues to be devalued by foreclosures and short sales, which made up almost 40 percent of all home sales in February.

Home builders have decided to stop until the inventory of new homes goes down and foreclosures stop. Financing was needed by 80 percent of builders before the recession. According to the National Association of Home Builders, only 20 percent now are looking for construction loans.

Articles cited

Associated Press

finance.yahoo.com/news/February-construction-apf-1467794995.html?x=0&sec=topStories&pos=8&asset=&ccode=

Market Watch

marketwatch.com/story/buyers-shun-new-homes-1301521568482

CNN Money

money.cnn.com/2011/03/23/real_estate/new_home_sales/index.htm