WASHINGTON – Construction spending fell for a fifth straight month in February as another big drop in home building offset a slight rebound in nonresidential construction.
The Commerce Department said Wednesday that February construction activity dropped 0.9 percent, less sharply than the 1.5 percent decline economists expected. Total construction has been falling since October. The level of activity is at the slowest pace in nearly five years.
The weakness in February reflected a 4.3 percent drop in housing construction, which pushed the level down to the lowest in 11 years.
Home builders have cut back sharply, but face a rising glut of unsold homes as record mortgage foreclosures dump more properties on the market. Lennar Corp. said Monday that its fiscal first-quarter losses surged 77 percent due to charges to adjust land and inventory values, and plunging home deliveries and new orders.
The construction report showed non-residential construction rose 0.3 percent in February, a slight rebound following a 4.3 percent drop in January which had been the biggest decline in 15 years.
With the financial sector facing its worst crisis in seven decades, banks have tightened their loan standards, making it harder to get financing for shopping centers and other commercial projects.
More bad news on the housing front came Tuesday when the Standard & Poor’s/Case-Shiller index of home prices in 20 major cities showed a record decline of 19 percent for the three months ending in January compared to the same period a year ago. The biggest declines were in cities already hardest hit by the housing bust including Phoenix and San Francisco.
Still, the National Association of Realtors last week said sales of previously occupied homes unexpectedly jumped in February by the largest amount in nearly six years as first-time buyers took advantage of deep discounts on foreclosures and other distressed properties. Some economists say that could help moderate declines.
Analysts are forecasting that the commercial real estate industry is poised to fall into the worst crisis since the last great property bust of the early 1990s. Delinquency rates on loans for hotels, offices, retail and industrial buildings have risen sharply in recent months and are likely to soar through the end of 2010 as companies lay off workers, downsize or shut their doors.
Construction spending by the government showed a 0.8 percent increase in February following two months of declines. The strength came in an increase of 0.8 percent in spending on federal building projects and a similar 0.8 percent rise in spending on state and local government projects.
All the changes left total construction spending at a seasonally adjusted annual rate of $967.5 billion in February, the slowest pace since March 2004.