WASHINGTON — Optimism is in short supply among U.S. homebuilders, a sign that the depressed housing market will slow the economy’s gains this year.
The outlook by builders hasn’t improved since the fall, when new-home sales were in the midst of their bleakest year in a half-cen
tury.
Less home building means fewer jobs for the economy. Construction work now accounts for about 5 percent of the nation’s private employment. But nearly 2 million of the roughly 14 million unemployed Americans previously worked in construction.
Analysts say the economy needs to accelerate job creation before the housing industry can fully recover. Without more jobs and higher wages, home sales will stagnate.
“We probably won’t see a strong recovery in construction jobs anytime soon,” said Sal Guatieri, senior economist BMO Capital Markets. “Not a lot of people are showing up to builders’ lots, not even to kick the tires. We just have to wait it out.”
The National Association of Home Builders’ index of builder sentiment for February was unchanged for the fourth straight month, at 16, the association said Tuesday. Any reading below 50 indicates negative sentiment. The index hasn’t topped 50 since April 2006.
On Wednesday, the Commerce Department will report on home construction for January. The consensus view of economists is that builders broke ground on a seasonally adjusted annual rate of 535,000 homes last month. That’s barely half the pace that economists view as healthy.
Homebuilders are struggling to compete with waves of foreclosures that are forcing prices down. Banks foreclosed on more than 1 million homes last year, and this year’s figure is expected to be higher. Last year was also the worst in more than a decade for sales of previously occupied homes.
High unemployment, tight lending standards and uncertainty about prices have kept many would-be buyers away. Mortgage rates had been at their lowest levels in decades but have begun to climb. The average rate for a 30-year fixed mortgage just topped 5 percent for the first time since April.
Outside of housing, most signs point to a strengthening economy. The unemployment rate, now at 9 percent, fell over the past two months at the fastest pace in 50 years. Layoffs have sunk to their lowest levels since 1993. Economic growth is rising. And people are spending at the highest levels since 2006, when the housing market went bust.
Further declines in home prices could make people feel less secure with their finances, slowing spending and broader growth.
New-home sales represent only a small fraction of overall sales. But they drive job growth in construction. Each new home built generates, on average, the equivalent of three jobs for a year and about $90,000 in taxes, according to the homebuilders’ group.
More jobs would spur demand for new homes. Increased sales would help clear some of the excess supply. Prices would stabilize, consumer confidence would rise and prices would gradually increase.
But with prices falling in most U.S. cities, new homes are less likely to be built.
“It’s very hard to make a living when homes are being sold at fire-sale prices,” said Patrick Newport, an economist with IHS Global Insight. “The economy’s got traction, so the housing market should improve. But the numbers right now across the board are at rock-bottom levels.”
The latest builder sentiment report reflects a survey of 424 residential developers. They are more optimistic about single-family sales now and over the next six months than they were in January, even though foot traffic by prospective buyers remains fairly flat.
The world’s biggest home-improvement retailer, Home Depot Inc., said Tuesday it plans to hire more than 60,000 seasonal workers to help with the busy spring season. But those hires, which are similar in number to the company’s staffing levels last year, are tied to a seasonal promotion focused on flowers, vegetables and lawn care products.
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