New-home construction took a bigger-than-expected tumble in September, putting the nation on track to build the fewest homes this year in more than six decades.
That's according to the latest report by the U.S. Department of Commerce. Construction of new homes and apartments across the United States dropped by 6.3 percent last month, a bigger decline than the expected 1.6 percent decrease.
This pushed total production to a seasonally adjusted annual rate of 817,000 units, the slowest pace since January 1991 when the country was in a recession and going through a similar housing correction.
In the West, construction slipped by 16.8 percent, with single-family building hitting a record low.
New-home construction across the Valley also fell last month, according to housing analyst R.L. Brown. His September statistics for the Valley will be released next week.
"We're all in the same bag, and while we expect to see improvement in Phoenix at a more rapid pace than other parts of the country because of the fact that we still do have positive population growth, there are going to be some rough months ahead as there are for the rest of the nation," he said. "New-home (sales) were actually up for September, but (construction) permits were indeed down. That suggests they're still working through inventory."
Applications for building permits, considered a good sign for future activity, also fell sharply nationally in September, dropping by 8.3 percent to an annual rate of 786,000 units, the weakest level since November 1981.
Standard Pacific Homes, among the Valley's largest homebuilders, has slowed its new-home construction, and has just a small inventory of homes for sale, said Cathy French, vice president of sales and marketing.
"We're hearing title companies are busy with foreclosures (selling) and anything that (sells) takes inventory off the market, so that's good," she said. "We have averaged for the year with our (sales) ... approximately three sales per community, so not too bad. I don't think it's as bad as people make it out to be."
New-home sales have remained steady since the start of the year, suggesting the new-home market has hit a bottom, Brown said.
"I didn't look at (the drop in new construction) as being a particularly negative thing as long as the (sales) were up because we have to get rid of the inventory," he said. "We have to get rid of the (existing home) inventory and we have to get rid of the remaining new-home inventory before we can expect (construction) to change."
Buyers are benefiting from the current market because it's "distressed merchandise pricing" for both new and existing homes, Brown said.
"Because of the high values in both new and resale homes, (buyers) have a wider range of choice, whereas before they might have been relegated to older homes and perhaps in neighborhoods that were not as well maintained and what have you," he said. "But today they have the advantage of bargain-sale time, blue light specials."
New-home construction is likely to remain depressed beyond the end of the year because there's still a lot of inventory to move, Brown said.