Builders began work on fewer projects in May, led by steep declines in state and local government spending.
The Commerce Department says construction spending declined 0.6 percent in May to a seasonally adjusted annual rate of $757.9 billion. It is barely above an 11-year low hit in February and roughly half the $1.5 trillion pace considered healthy by most economists. Analysts say it could be another four years before construction returns to healthier levels.
Home construction fell 2.1 percent. But much of the decline was because an equal decline in apartment building, which can be volatile.
Government projects fell 0.8 percent to a seasonally adjusted $276 billion annual rate. It was the eighth consecutive monthly decline and it dropped government spending to its lowest level since April 2007.
State and local governments accounted for all the declines. They fell 1.2 percent to $246.6 billion. Activity at this level is at the lowest point since December 2006. State and local governments have been cutting back on building projects as they deal with large budget deficits.
Spending at the federal level rose 2.1 percent to $29.6 billion.
Building on private projects fell 0.4 percent to a seasonally adjusted annual rate of $477 billion in May.
Residential spending fell 2.1 percent. Construction of single-family homes dropped 0.3 percent in May and spending on apartment construction fell 2.1 percent.
Homeowners are renovating their houses rather than moving. Builders are struggling to compete with a wave of foreclosures that are forcing down prices of previously occupied homes.
Older, re-sold homes are a comparative bargain and in great supply.
The median price for a previously occupied home in May was $166,500. New homes are about $56,100 higher, or nearly 31 percent. The gap is largely due to the flood of foreclosures and short sales, when lenders accept less than what's owed on mortgages.
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