No boost to economy from builders
Construction and permits both fall in May
WASHINGTON — Home builders are sending a message: They won’t be able to contribute much to the economic recovery now that government home-buying incentives have vanished.
Home construction and applications for building permits sank in May, overshadowing favorable reports on manufacturing and wholesale inflation.
Fewer homes mean fewer jobs. Construction fuels a broad swath of industries across the economy. Yet double-digit unemployment is among the main reasons people have passed on buying new homes. Even with near-record-low mortgage rates, the industry is struggling.
“The economy is growing, and the housing market is still in recession,’’ said Eugenio Aleman, senior economist with Wells Fargo Securities. “It’s not going to contribute to growth, but it is not going to pull the economy back down.’’
Overall, new home and apartment construction fell 10 percent in May to a seasonally adjusted annual rate of 593,000, the Commerce Department said yesterday. April’s figure was revised downward to 659,000.
Applications for new building permits — a sign of future activity — sank 5.9 percent to an annual rate of 574,000. That was the lowest level in a year.
Builders are scaling back now that tax credits of up to $8,000 have expired. The biggest evidence of that trend: The number of new single-family homes fell 17 percent, the largest monthly drop since January 1991.
But yesterday, the Senate approved a plan to give home buyers three more months to finish qualifying for federal tax incentives. The move by Senate Majority Leader Harry Reid would give buyers until Sept. 30 to complete their purchases and qualify for tax credits. The proposal, approved by a 60-37 vote, would only allow people who already have signed contracts to finish at the later date.