WASHINGTON -- Housing construction plunged to the second lowest level on record in March, reversing a big jump from the previous month. Economists, however, were heartened by indications that the long slide in single-family construction could be coming to an end.
The Commerce Department said Thursday construction of new homes and apartments dropped 10.8 percent last month to a seasonally adjusted annual rate of 510,000 units. That was the second lowest construction pace in records that go back 50 years.
The decline was worse than economists had expected and February activity also was revised lower. Applications for building permits fell 9 percent in March to a record low of 513,000 units.
But economists noted the big movements in construction starts in March occurred in the volatile apartment sector, which plunged 29 percent to an annual rate of 152,000 units after having surged 62.1 percent in February.
The much larger single-family sector actually stabilized in March at an annual rate of 358,000 units, the same level as February when single-family starts managed a small 0.6 percent rise.
"The headline numbers are disappointing," wrote IHS Global Insight Economist Patrick Newport. "But the details indicate that the market for single-family homes is testing the bottom."
The March single-family building pace remains just half of the level of activity a year ago, "but stabilization would represent progress," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Analysts cautioned that while housing sales and prices eventually will rebound, continuing home foreclosures and job losses likely mean that will take many months.
Joel Naroff, an economist at Naroff Economic Advisers, said the steep slump in housing has trimmed a percentage point from overall economic growth for the past two years so even a stabilization at low levels would help.
"The bad news is that home construction is still in the tank. The good news is that single-family activity may finally be stabilizing," he said.
The drop in construction in March followed a 17.2 percent surge in February, an unexpected gain driven by the big increase in apartment activity.
The 510,000 unit pace for total construction is the second lowest in government records dating to January 1959. The record low was a 488,000 unit pace set in January.
For March, the biggest decline was a 26.3 percent drop in the West followed by a 16.8 percent fall in the South. Construction activity rose 15.9 percent in the Midwest and 6.3 percent in the Northeast.
The setback in housing starts came after several more upbeat reports showing tentative rebounds in sales and builder sentiment.
The National Association of Home Builders reported Wednesday that its gauge of builder sentiment posted its biggest one-month jump in five years in April.
While still near historically low levels, the trade association said the index rose five points to 14, its highest reading since October. The trade group includes industry heavyweights such as Centex Corp. and Lennar Corp., as well as hundreds of smaller builders nationwide.