Economic recovery is leaving the construction industry behind

In the last quarter the economy has been recovering without construction spending, which continues to fall. Construction spending hit a twelve-year low in February as that industry of the economy continued to weaken. New home construction, dragged down by foreclosures and short sales, was even worse, dropping to the lowest level in recorded history.

February as a bad month for construction

Builders broke ground on fewer homes, apartments and government projects in February than they have in more than a decade. In February, the construction spending went down about 1.4 percent. That was the third month that it has gone down. The seasonally adjusted annual rate of construction spending in February hit $760.8 billion, the weakest level since October of 1999. The U.S. economy appears to be getting a little bit better right now. At the same time, the construction industry is going down. There are fewer corporations wanting to build office buildings, hotels and shopping centers still even though the recession is over. Nevertheless, the construction market has to deal with this. February construction activity fell to about half the $1.5 trillion level economists figure is needed for a healthy construction market. The housing bubble that brought on the recession will not recover for four more years, according to estimation.

New home construction burst along with housing bubble

Private residential construction fell 3.7 percent in February to an annualized rate of $228.5 billion. construction of single-family and multi-family homes also went down. This was because foreclosures and unsold homes are still high. Until housing inventory could be cleared, new home construction will continue to languish. There was a 3 percent drop in existing home sales past year with a 28 percent drop in new home sales, reports the National Association of Realtors. The government started keeping track of levels in 1963. Since then, the biggest drop was in February, 2011, with a 16.9 percent decrease in an annual rate from 301,000 to 250,000.

Not a soul to build or purchase new homes

The Gross Domestic Product bottom line is driven by new home sales in construction. It costs 29 percent more for a new home than an existing home currently. The National Association of Realtors states this is twice what is considered normal. About 4 percent of February home sales were foreclosures and short sales, which is hurting the industry. The foreclosures need to end while the inventory of new homes needs to go down. Until this occurs, home builders will stop building homes. Financing was needed by 80 percent of builders before the recession. In accordance with the National Association of Home Builders, only 20 percent now are looking for construction loans.

Information from

Associated Press

finance.yahoo.com/news/February-construction-apf-1467794995.html?x=0&sec=topStories&pos=8&asset=&ccode=

Market Watch

marketwatch.com/story/buyers-shun-new-homes-1301521568482

CNN Money

money.cnn.com/2011/03/23/real_estate/new_home_sales/index.htm