WASHINGTON — The budding economic recovery isn't getting much help from the home-building industry, which normally creates jobs and drives growth when a recession ends.
Uncertainty over whether a home-buyer tax credit would be extended weighed down construction last month — a sign of how much the fledgling recovery depends on government support.
Home building unexpectedly plunged to its lowest point since April, the Commerce Department said this week. The figures show that builders fear there aren't enough buyers to soak up the glut of unsold homes already on the market — a supply magnified by record-high foreclosures.
Congress renewed the home buyer tax credit earlier this month and broadened its reach. But even with government aid, the weakness of the housing sector is dragging on the economy.
"It will take a while before residential construction begins to contribute meaningfully to growth," Jennifer Lee, an economist at BMO Capital Markets, wrote in a research note.
That's likely to be the case in the Northern San Joaquin Valley, where new home construction collapsed after the real estate bubble burst, sending sales tumbling and prices into a tailspin.
Only 224 new single-family homes were sold in Stanislaus County during the first nine months of 2009. Compare that with 1,467 homes sold during the same months in 2006.
This September, the county's new-home subdivisions sold just 14 houses. That's about a 93 percent decline from September 2006, according to sales statistics gathered for the California Building Industry Association by Hanley Wood Market Intelligence.
Some builders say sales have continued to decline and the prospects for a turnaround in the coming months don't look good, especially if a new round of foreclosure properties flood the market, as some real estate experts fear."There has not has not been much improvement in the underlying demand for new and existing homes," said Mark Vitner, senior economist with Wells Fargo Securities. "That's a warning for 2010."
So is a decline in applications for building permits. Applications fell 4 percent to an annual rate of 552,000 units. That was the lowest since May and missed analysts' expectations of 580,000. Still, applications for single-family homes fell only 0.2 percent.
Foreclosures, though, remain sky high. And many experts predict a new wave starting next spring. More than 332,000 households, or one in every 385 U.S. homes, received a foreclosure-related notice in October, according to RealtyTrac Inc.
Since the housing market in the Northern San Joaquin Valley hit its peak in 2005, more than 17,000 Stanislaus homes have been foreclosed on by lenders and that number continues to grow, according to ForeclosureRadar statistics.