Article by Eric Morath and Alan Zibel of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- U.S. home building declined in March but new permits reached their highest level since September 2008, showing the sector is struggling even as builders anticipate future demand.
Home construction decreased 5.8% from February to a seasonally adjusted annual rate of 654,000, the Commerce Department said Tuesday. It was the second straight monthly decline.
The reading was far below expectations. Economists surveyed by Dow Jones Newswires had forecast housing starts would rise by 0.7% to a seasonally adjusted annual rate of 703,000.
Construction of single-family homes, which made up 71% of housing starts last month, fell by 0.2%. Meanwhile, multifamily homes with at least two units, a volatile part of the market, posted a 16.9% loss.
February's figures were revised to a rate of 694,000 starts from a previously reported 698,000. The newly stated data reflects a 2.8% decline from January.
This year's numbers, while up from a low of 478,000 in April 2009, are well below the historical average. Builders have started construction on about 1.5 million new homes per year since 1959.
The number of new housing permits, an indication of future construction, rose by 4.5% in March to annualized level of 747,000. Economists had forecast permits to drop by 0.3% to an annual rate of 713,000.
The uneven recovery of the housing market, including new home construction, has weighed on the overall economic rebound.
"This unusually weak recovery can be at least partly explained by the large drop in house prices and severe slump in housing activity," Federal Reserve Governor Sarah Bloom Raskin said in a speech last week.
Showing how difficult it is for the sector to climb out its five-year-long slump, the National Association of Home Builders' confidence reading, released Monday, slipped for the first time in seven months in April, indicating that potential home buyers have been hesitant.
The slowing of job growth in March, after a strong start to the year, may only make buyers more reluctant. The shoppers also have ample choice of existing homes, including a glut of foreclosures, which tend to be more affordable than new construction.
The Commerce data showed that housing starts were mixed across four U.S. regions. New building declined 15.9% in the South and was unchanged in the West, from the prior month. The Northeast posted a 32.8% improvement in March and the Midwest recorded a 1.0% gain.
Actual housing starts, calculated without seasonal adjustments, increased to 54,500 in March from a downwardly revised 47,900 in February. Lumber and commodities markets watch those numbers closely to gauge demand.
The Commerce report can be found at http://www.census.gov/construction/nrc/pdf/newresconst.pdf
-By Eric Morath and Alan Zibel, Dow Jones Newswires; 202 862 9279; email@example.com - Kristina Peterson contributed to this article.
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