Home Building Drops 11%; Apartment Falloff Blamed

Housing construction, hurt by a steep drop in apartment building, fell 11% in February, the sharpest decline in almost a year, the government reported today.

The Commerce Department said construction of new homes dropped to a seasonally adjusted annual rate of 1.64 million units last month, down from 1.84 million units in January.

The decline, the sharpest since housing starts fell 23% last March, came despite the fact that construction of single-family homes rose 5.3% during the month.

That gain was offset by a 36.7% drop in construction of apartment developments with five or more units. Construction of smaller apartment projects fell 12.4%.

Large apartment units had shown an increase of 68% in January, and analysts said the February decline was to be expected. They said this category is often volatile and predicted the housing industry will have another good year.

Commerce Secretary Malcolm Baldrige was optimistic, predicting that housing construction will climb to 1.8 million units this year. Baldrige said that housing activity has picked up in the last two months, with the annual rate during this time 8.9% above the level in the last quarter of 1984.

Michael Sumichrast, chief economist for the National Assn. of Home Builders, said that mortgage rates, which have increased slightly in the last four weeks, are having some dampening effect on construction activity.

Mortgage rates had been declining for seven consecutive months, hitting a low of 13.47%, on average, for 30-year, fixed-rate loans in early February before they began heading a bit higher.