WASHINGTON — U.S. builders broke ground on fewer single-family houses in July, leaving home construction at depressed levels.
The Commerce Department said Tuesday that builders began work on a seasonally adjusted 604,000 homes last month, a 1.5 percent decrease from June. That's half the 1.2 million homes per year that economists say must be built to sustain a healthy housing market.
Single-family homes, which represent 70 percent of home construction, fell 5 percent. Apartment building rose more than 6 percent.
Building permits, a gauge of future construction, declined 3.2 percent. Jill Brown, vice president of economics at Credit Suisse, said that decline suggests "very little forward momentum."
The number of homes under construction is the fewest in 40 years. Just 413,000 homes are under construction, after accounting for seasonal factors. A decade ago, roughly 1.6 million homes were built.
Though new homes represent just 20 percent of the overall housing market, they have an outsized impact on the economy. Each home built creates an average of three jobs for a year and about $90,000 in taxes, according to the National Association of Home Builders.
Cash-strapped builders are struggling to compete with deeply discounted foreclosures and short sales — when a lender allows the owner to sell for less than what is owed on the mortgage.
One reason for the slow pace is that previously occupied homes are a better deal than new homes. The median price of a new home is more than 30 percent higher than the median price for a resale. That's more than twice the markup in a healthy housing market.
Over the past year, the number of finished apartments in the United States has surged nearly 63 percent, the biggest percentage jump since 1996. Renting has become a preferred option for many Americans who lost their jobs during the recession and were forced to leave their rapidly depreciating homes.
New home sales fell in June to a seasonally adjusted pace of 312,000 homes per year, less than half the 700,000 per year that economists consider to be healthy.
After previous recessions, housing accounted for 15 to 20 percent of overall economic growth. This time around, between 2009 and 2010, housing contributed just 4 percent to the economy.
Despite historically low mortgage rates, few Americans are buying homes as the economy fizzles and job growth is stagnant. "The now-extended period of ultra-low interest rates is not squeezing any new demand out of the rock," said Pierre Ellis, an analyst at Decision Economics.