Housing Off 2.4% in 3rd Weak Month : Can’t Remember a Week of Such Bad News, Analyst Says

Housing construction fell 2.4% in July, the third consecutive month of weakness, as residential building starts continued to disappoint those looking for a rebound spurred by falling interest rates.

In other pessimistic news, the government also said today that U.S. factory operating rates were frozen in July for the fourth straight month as U.S. manufacturers kept suffering from foreign competition.

The latest reports reinforced recent news on unemployment, auto sales, retail sales and business inventories, which all have pointed to continued sluggishness for the economy, not the rebound hoped for by the Reagan Administration.

Every Report Bad

“I can’t remember a week when we have had this much bad news come in. Every report has been below market expectations,” said David Wyss, financial analyst at Data Resources Inc., a private forecasting firm. “The housing start number is just the latest evidence that things are not going to pick up in the second half the way people had hoped.”

The Commerce Department report showed that new housing was built at a seasonally adjusted annual rate of 1.65 million units in July as a slight advance in single-family construction was overshadowed by a steep drop in apartment building.

The July decline followed a huge 13% fall in May and a weak 0.8% June increase.

Mortgage Rates Falling

This weakness has been occurring against a backdrop of declining mortgage rates, which normally would lead to a rebound in housing activity. Fixed-rate mortgages stand at about 12.25%, down from a 1984 high of 15.2%.

Some analysts said, however, that the benefits from falling interest rates are being overridden by the weakness in the overall economy.

“We have fairly high levels of consumer debt, consumers are not getting the income gains they did early in the recovery and they are beginning to worry about the future,” said James Christian, chief economist for the U.S. League of Savings Institutions.

The Administration, however, maintained that further gains in housing activity can be expected. A strong housing sector is one of the keys to the Administration’s forecast that growth will rebound to a 5% annual rate in the second half of the year, five times the pace of the first six months.

More Starts Expected

“Good levels of consumer confidence and small increases in new home prices relative to other price increases should support renewed improvement in starts during the next few months,” Commerce Secretary Malcolm Baldrige said in a statement.

But many private analysts are predicting that growth in the second half of the year will be at just half the rate forecast by the Administration.

The Federal Reserve said U.S. factories, mines and utilities operated at 80.8% of capacity in July, the fourth consecutive month that the operating rate has been stuck at this level.

Although autos and steel showed good gains in July, these increases were held back by widespread declines in other industries.