Construction spending rises for 3rd straight month

WASHINGTON (AP) ? U.S. builders spent more in October on new homes, offices and shopping centers, pushing construction spending up for a third straight month. Despite the gains, construction spending remained depressed.

Construction spending rose 0.8 percent in October to a seasonally adjusted annual rate of $798.5 billion, the Commerce Department said Thursday. While an improvement, that's barely half the $1.5 trillion that economists consider healthy. And through the first 10 months of this year, construction spending is 2.9 percent below the dismal levels from 2010.

The construction industry was hit hard from the housing bust and has had trouble recovering from the recession. Analysts say it could be four years before construction returns to healthy levels.

Severe budget problems have squeezed state and local governments while the federal government is under pressure to cut deficits.

Facing a weak housing market and slower economic growth, private builders have scaled back their construction plans.

Builders broke ground on new homes and apartments at a seasonally adjusted annual rate of 628,000 in October, roughly half the 1.2 million that economists equate with a healthy housing market.

One positive sign: applications for building permits, considered a good indication of future activity, rose 11 percent in October. The increase was led by a 30 percent jump in permits for apartments, which reached the highest level in three years.

Still, sales of new homes are on pace for their worst year since the government began keeping records in 1963.

Builders are struggling to compete with weak demand because of still-high unemployment and a glut of homes on the market because of foreclosures and short sales ? where lenders accept less for a house than the mortgage on the home is worth. Those homes are selling for at an average discount of 20 percent, which is lowering neighboring home values.

While new homes represent less than one-fifth the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/f70471f764144b2fab526d39972d37b3/Article_2011-12-01-Construction%20Spending/id-8137ea93698f40c39c3ac4bcf479af23

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