New housing construction fell 2.3 percent in June to the lowest level since the recession of 1982, the Commerce Department reported this week, but economists said the market has apparently reached the bottom.
Applications for new housing permits -- a harbinger of future construction activity -- jumped 3.9 percent last month in the first increase since January, according to data released by the Commerce Department's Census Bureau.
"It's probably not going to get worse than what we've seen so far," said Martin Regalia, chief economist at the National Council of Savings Institutions.
"Unless something detours us from here, this is a clear indication we've bottomed out -- but it's been a rough road," Regalia said. "We survived the crash, but we're walking away very groggily."
Regalia blamed high interest rates, lower income growth and a lag in consumer spending for this "pretty good drubbing."
In May, new housing starts were off 0.9 percent, while building permits dropped 3.9 percent, the government said.
A Commerce Department spokesman said the seasonally adjusted annual rate of about 1.2 million new housing starts in June was the lowest since about the same level in October 1982, as the United States was emerging from its worst economic downturn since the Great Depression of the 1930s.
For most of the year, construction has been in the doldrums as the U.S. economy has slowed following eight years of unprecedented growth.
But June's drop was worse than many private economists expected -- a signal the bottom has been hit.
"I think this is going to be the low one," said Jerry Jordon, chief economist at First Interstate Bancorp in Los Angeles. "This should be the last month that the higher regime of interest rates dominates."
David Wyss, an economist at the private forecasting firm of DRI/McGraw Hill in Lexington, Mass., cautioned: "It's going to be a long bottom. Nobody is buying. Consumers are getting scared of making any kind of commitment."
The Commerce Department said construction of new single-family homes nationwide edged down 0.1 percent in June, while work on new dwellings with two, three and four apartments advanced 5.1 percent.
Starts on buildings with five or more apartments dropped 10.6 percent.
By region, housing starts slipped 11 percent in June in the Northeast, fell 9.2 percent in the Midwest, increased 8.8 percent in the South and dropped 10 percent in the West.