LOS ANGELES -- Plagued by too many houses and too few buyers, 2011 is shaping up to be the worst year on record for new-home sales. The slump is pushing the key home-building industry into its fifth year of decline and keeping the U.S. economy from a rebound.
After past recessions, home building was a crucial driver of growth, creating new jobs firmly planted on American soil. But housing isn't helping out this time because builders' hyperactivity during the boom years and the loss of hundreds of thousands of people's homes to foreclosure have left a big supply of properties on the market.
Many economists don't see a significant rebound occurring until housing is fixed. "If the recovery is going to come, it is going to be driven by two sectors: manufacturing and construction, and it doesn't look like there is going to be a big recovery in manufacturing," said economist Ed Leamer, director of the UCLA Anderson Forecast. "It is going to have to come in housing; otherwise we are going to limp along as we have been."
Nationally, new single-family homes sold at a seasonally adjusted annual rate of 298,000 in July, putting the industry on pace to post the lowest annual sales since the Commerce Department began keeping data in 1963.
"It is a lousy market, and it is not getting any better. It could get a lot worse," said Patrick Newport, an economist for consulting firm IHS Global Insight. "Our view is there is a 40 percent chance of a recession, and that will probably drag housing prices down at least another 10 percent."
The housing market's malaise is reflected in construction employment. From July 2010 to July 2011, such jobs declined in 148 out of 337 metropolitan areas, rose in 136 areas and were unchanged in 53, the Associated General Contractors of America said.
Wall Street is giving home builders a vote of no confidence. Shares for the nation's 12 largest publicly traded home builders, as tracked by a Standard & Poor's index, have fallen 22.7 percent since the start of the year, while the broader market, as tracked by the S&P 500 index, is down 4.2 percent.
"Home builders' prices, especially in the month of August, have really suffered," S&P analyst Kenneth Leon said. "The stock markets look for a much weaker economy, and if there is going to be a weaker economy, it is going to directly affect the housing market."