WASHINGTON — For homebuilders, it hardly feels like an economic recovery. Nearly two years after the recession ended, the pace of construction is inching along at less than half the level considered healthy.
Single-family homebuilding, the bulk of the market, has dropped 11 percent in that time. And there’s no sign it will improve soon.
Builders are struggling to compete with waves of foreclosures that have forced down prices for previously occupied homes. The weakness is weighing on the economy.
Though new homes represent a small portion of overall sales, they have an outsize impact on the economy. Fewer new homes means fewer jobs.
Skip Howes, a homebuilder in Wood land Park, has managed to stay in business only after laying off two workers in the past few years. He’s now running a two-man operation in the small town outside of Colorado Springs. The other man is his son.
But business isn’t picking up. Before the housing boom, he built as many as six homes a year. Last year, he built one. This year, he has had no home projects.
“We’ve been holding on for years,” Howes said. “If I can’t diversify, and if things don’t improve, I might have to lay off my son.”
The U.S. Commerce Department said Tuesday that new-home construction plummeted last month to a seasonally adjusted rate of 523,000 homes a year. A big drop in volatile apartment- building construction pulled down the monthly figures. Tornadoes and flooding also disrupted construction proj ects throughout the South.
If the pace doesn’t improve, this year could end up with fewer new homes than last year and only slightly more than 2009 — the two worst years on records dating back half a century. Those two years benefited from a temporary homebuying tax credit.
Tuesday’s disappointing construction data contributed to a sell-off on Wall Street. The Dow Jones industrial average fell more than 150 points before recovering more than half of its losses to end the day down 69 points. Nearly every major homebuilder stock dropped.
Higher commodity prices have increased the cost of nearly every building material, including lumber, roofing tiles and windows.
The nation’s largest homebuilders — including PulteGroup, Lennar, D.R. Horton and KB Home — have deeper pockets. So they have survived the turbulent stretch by cutting prices and offering more incentives.
“Everybody is feeling the pinch,” said Greg Ugalde, a midsize homebuilder in Torrington, Conn.
