New residential construction figures released this week by the the U.S. Census Bureau and the U.S. Department of Housing and Urban Development exhibit the effects of the ongoing foreclosure crisis. Fewer housing start projects are being completed than ever before.

According to a joint press release issued yesterday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, new residential construction figures initially suggest that the business of housing starts is suddenly booming. Here’s a breakdown of the statistics:

  • 717,000 building permits were issued last month for “privately-owned housing units.” This is an impressive 34.3 percent jump above the February 2011 estimated figure of 534,000 permits.
  • The news for shovel-ready projects is slightly better. Individual housing starts in February registered at an adjusted annual rate of 698,000, a 34.7 percent jump over the same month in 2011.

So that’s the good news. What’s the bad? Housing completions, which reflect homes that are ready for sale or occupancy, actually fell precipitously over February 2011. The annual rate currently stands at 568,000, a seven percent decline over the annual rate of 611,000 we enjoyed at this time last year.

I use the word “enjoyed” somewhat ironically as no one would call last year’s rate for completions an explosion. So what’s going on? Why are so many building permits being issued and so many projects started, with so few finished products coming off the assembly line?

In two words, you can blame the foreclosure crisis. On the same day that the U.S. Census Bureau and the U.S. Department of Housing and Urban Development released their figures, Slate writer Justin B. Hollander published a piece with the headline, “What To Do With Vacant Houses.” He writes, “The ongoing repercussions of the foreclosure crisis continue to haunt cities and towns across the country. At last count, 9.9 million homes have been foreclosed upon since 2008, contributing to a total of more than 10 million vacant homes in the United States.”

If you have 10 million properties sitting empty already, and a deficit of buyers, you don’t exactly have to rush to produce more housing stock.  Owing to stagnant wages, unemployment, and job security fears compounded by a lack of available credit, the economic environment remains ill-suited to produce another housing boom.

Recently released reports from a variety of sources estimate that 28 percent of borrowers, those who still remain in their homes, are underwater with their mortgage loans. Should these homeowners lose the ability to keep up with their payments, or simply grow weary of trying, expect another large round of foreclosures to flood the housing market. This is certain to lead to further decreases in new housing completions. That flurry of building permits issued last month could ultimately be for naught.