WASHINGTON — Construction of new homes and apartments fell to its weakest pace in 17 years in August, far more than expected, but lower mortgage rates and tax credits have given builders some glimmer of hope of a possible rebound.
Housing construction dropped 6.2 percent last month, the Commerce Department reported Wednesday, far larger than the 1.6 percent decline analysts had been expecting.
It was the slowest building pace since January 1991, but that should help clear out bloated inventories of unsold homes. Building activity is on track to slide below the 1 million mark for the year, the first time that has happened in more than six decades.
“The housing market is just cratering — sales, prices and construction are all down,” said Mark Zandi, chief economist at Moody’s Economy .
Supporting the view that construction will fall further, building permits, considered a good indicator of future activity, dropped 8.9 percent in August to an annual rate of 854,000 units.
But Zandi said he believed the low point could soon be reached, at least in terms of construction and sales, although he said prices will likely keep falling until next spring. Part of the reason for optimism is the fall in mortgage rates that has occurred since the government moved to seize control over Fannie Mae and Freddie Mac.
