Home building takes a big dip
Government report shows new home construction declined nearly 11% last month, dropping to the second lowest level on record.
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NEW YORK (CNNMoney.com) -- Initial construction of U.S. homes fell more than expected in March, sinking to the second lowest level on record, according to a government report released Thursday.
Housing starts fell to a seasonally adjusted annual rate of 510,000 last month, down nearly 11% from a revised 572,000 in February, according to the Commerce Department. February starts were originally reported at 583,000.
Starts have not been this low since January, when they fell to an annual rate of 477,000, which was the lowest since the government began keeping records in 1959. The March total was below the 540,000 rate economists surveyed by Briefing.com had forecast.
The bulk of the decline was in multi-family homes, which fell more than 42% to an annual rate of 116,000 last month. In February, construction of multi-family units unexpectedly soared to a revised rate of 202,000.
"Housing data are notoriously volatile in the winter months and all of the loss can be attributed to the also volatile multi-family segment," said Adam York, an economist at Wachovia Economics Group, in a research report.
However, construction of single-family homes, considered the core of the housing market, held steady at an annual rate of 358,000, even with February's total.
The unchanged rate on single-family homebuilding "gives us some hope that a bottom may be forming," York said. But a decline in building permits "takes some luster off the relatively better news we had been seeing in housing," he added.
Applications for building permits, an indicator of future construction activity, fell 9% to a seasonally adjusted annual rate of 513,000 last month. Economists were expecting permits to fall to 549,000.
"The trend seems to be leveling off," said Ian Shepherdson, an economist at High Frequency Economics, in a research note. "A real recovery is still some way off, but stabilization would represent progress."
Homebuilders have scaled back new construction projects in recent months to adjust for a glut of unsold homes, including many foreclosed properties.
RealtyTrac, an online marketer of foreclosed properties, said Thursday that foreclosure filings increased 46% in March versus last year.
The Obama administration announced Wednesday it had reached agreements with six major lenders as part of its plan to help 9 million homeowners avoid foreclosure. The plan, announced in February, calls for mortgage lenders and servicers to lower monthly payments or refinance loans for distressed borrowers.
At the same time, the housing market is being drained of potential buyers by rising unemployment. And tight credit conditions have made it hard for willing buyers to get financing. 
