Ahead of the Bell: Housing starts

Ahead of the Bell: Housing starts

Builders are expected to have begun work on more homes in January than the previous month but are still way off the pace consistent with a healthy economy.

The housing industry has just finished the worst two years for new home construction in a half-century. And the pace of building has only gotten worse. In December, builders started work at a seasonally adjusted annual rate of 529,000 new homes and apartments — a drop of 4.3 percent from November and the slowest pace since October 2009.

The consensus forecast among economists is that home construction jumped to a seasonally adjusted annual rate of 535,000 homes for January. The Commerce Department will release the new report at 8:30 a.m. Wednesday.

In a healthy economy, builders start about 1 million units a year. They built twice as many in 2005, at the height of the housing boom. Since then, the market has been in decline.

The collapse of the housing market pushed the country into a deep recession. More than a year after the recession ended, it is still struggling.

Millions of foreclosures have forced home prices down and more are expected this year. Tight credit has made mortgage loans tough to come by. And some potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further.

The flat-lined housing market is weighing on the overall economic recovery. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

The trade association reported Tuesday that its index of builder confidence remained stuck at 16 in February, where it has been for four straight months. A reading of 50 signifies a positive outlook about the future.