B of A Report for June : Housing Starts in State Off Slightly
Housing construction in California fell slightly in June for the second month in a row, partly reflecting a sharp run-up in interest rates on fixed-rate mortgages that occurred this spring, Bank of America reported Wednesday.
Nevertheless, general housing construction activity statewide remained well ahead of the 1985 pace, and the outlook is favorable for the rest of the year, the bank said.
For the record:
12:00 a.m. Aug. 15, 1986 FOR THE RECORD
Los Angeles Times Friday August 15, 1986 Home Edition Business Part 4 Page 2 Column 4 Financial Desk 1 inches; 27 words Type of Material: Correction
An article in Thursday’s Business section said incorrectly that “cities such as San Francisco have 5% to 6% occupancy rates in rental housing.” The reference should have been to “vacancy rates.”
Housing starts in June slipped to 273,600, off 0.8% from the May level, which in turn was down 2.7% from April. But the level in June was nearly 22% higher than the 224,400 recorded in June, 1985, the bank said.
Bank economist Michael Salkin noted that the latest slowdown coincided with a sharp rise in interest rates in May and June. Fixed-rate mortgage loans, after dipping to an average of 9.94% in late April, rose to an average of 11.14% in mid-June.
Rates have since dropped to about 10.70% and are expected to continue to decline to around 10% by the end of year, Salkin said.
The slowdown in overall housing activity also reflects a continuing drop in apartment construction. California now has too many apartments, and cities such as San Francisco have 5% to 6% occupancy rates in rental housing.
“It’s unheard of,” Salkin said.
Apartment construction is also lagging because the tax bill now being hammered out by Congress severely limits tax benefits for real estate partnerships that invest heavily in rental housing.
