WASHINGTON — Construction of homes and apartments fell in July to the lowest level in more than 17 years, but some economists said the drop could aid the slumping housing sector by helping to reduce a glut of unsold properties.
The U.S. Commerce Department said Tuesday that builders broke ground on 965,000 housing units on an annualized basis, down from a pace of 1.08 million in June. It was the weakest showing since March 1991.
However, July’s performance was better than the 950,000 rate that analysts expected.
The report showed that July construction of single-family homes fell by 2.9 percent from the previous month to a pace of 641,000. That was the lowest since January 1991.
Construction of apartments and other multifamily dwellings also fell sharply, after a large jump in June because of a change in New York’s building codes. That change, which went into effect July 1, gave a rare lift to overall housing construction in June.
Economists said the drop could help reduce the glut of unsold homes, a step toward turning around the slumping real-estate market. Homebuilders are competing with foreclosed homes selling at steep price discounts.
“Slower starts means less adds to inventory,” said Adam York, an economic analyst at Wachovia Corp. “We have too much supply on the market.”
Last month, the Commerce Department said unsold new homes declined to a 10-month supply in June, down from a peak supply of 11.2 months in March but still significantly above historic norms.
Inventories of existing homes, meanwhile, equaled an 11.1-month supply in June, the second-highest level in 24 years, according to the National Association of Realtors.
“The correction in the housing market has yet to find its bottom,” Richard Fisher, president of the Federal Reserve Bank of Dallas, said in a speech Tuesday.
New-home construction last month was down a steep 39.2 percent compared with July 2007, illustrating how much ground the housing market has lost in the past year.
