New-Home Construction a Long Way from Stable

U.S. construction spending fell in February, though the year is still off to a better start than the previous one.
According to the Commerce Department, construction spending throughout the country during February 2012 was estimated at a seasonally adjusted annual rate of $808.9 billion.
Frontal view of two hard hats, white on top of yellow, isolated on white background.That’s a drop of 1.1 percent over January’s estimate and is the biggest decline in seven months.
The decline was unexpected — experts had predicted an increase of anywhere from 0.1 to 1.1 percent — and it shows the reality that the new-home market still has a long way to go to stabilize.
Still, the numbers are better than the previous year’s. Construction spending in February 2012 registered 5.8 percent above the February 2011 estimate of $764.2 billion. In addition, during the first two months of this year, construction spending amounted to $111.3 billion, which is 7.4 percent above the $103.7 billion for the same period in 2011.
One of the biggest hurdles holding back new construction is the large inventory of homes already available for sale, including the growing stock of foreclosures, especially in the Chicago real estate market. The large amount of distressed properties on the market also pushes home prices down, which discourages builders from starting new projects.
Other data from the Commerce Department in February:
*Private, home construction spending fell 0.8 percent from January.
*Private, non-residential spending fell 1.6 percent.
*Educational construction dropped 2.5 percent from the previous month.
*Highway construction fell 2.6 percent.
To see all the construction statistics from February, click here.