WASHINGTON (AP) — Builders broke ground on fewer single-family houses in July, leaving home construction at depressed levels.
The Commerce Department said Tuesday that builders began work on a seasonally adjusted 604,000 homes last month, a 1.5% decrease from June. That’s half the 1.2 million homes per year that economists say must be built to sustain a healthy housing market.
Single-family homes, which represent 70% of home construction, fell 5%. Apartment building rose more than 6%.
Building permits, a gauge of future construction, declined 3.2%. Jill Brown, vice president of economics at Credit Suisse, said that decline suggests “very little forward momentum.”
The number of homes under construction is the fewest in 40 years. Just 413,000 homes are under construction, after accounting for seasonal factors. A decade ago, roughly 1.6 million homes were built.
Though new homes represent just 20% of the overall housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and about $90,000 in taxes, according to the National Association of Home Builders.
Cash-strapped builders are struggling to compete with deeply discounted foreclosures and short sales. A short sale is when a lender allows the owner to sell for less than what is owed on the mortgage.
Over the past year, the number of finished apartments in the United States has surged nearly 63%, the biggest percentage jump since 1996. Renting has become a preferred option for many Americans who lost their jobs during the recession and were forced to leave their rapidly depreciating homes.