Home, Apartment Construction Falls 7.6% in September

Construction of new homes and apartments plummeted 7.6% in September, the fourth decline in the past five months, as the spring boom in the housing industry faded further, the government said Friday.

In other disappointing economic news, the government reported that U.S. industry operated at just 79.2% of capacity in September, unchanged from the August level.

The Commerce Department’s housing report said homes and apartments were built at an annual rate of 1.68 million units in September, down from an August pace of 1.82 million units.

The September decline was a disappointment to analysts, and many said it had caused them to lower their forecasts for building activity next year.

Even with the recent weakness, housing construction for the first nine months of the year is running 7.7% ahead of the activity during the same period in 1985.

Analysts predicted that construction for all of 1986 will reach 1.85 million units, making it the best year since 1978. But economists said they looked for a sharp decline next year, a forecast that could spell trouble for overall economic growth.

“We have been supporting economic growth, but that is pretty much over now,” said Michael Sumichrast, economist for the National Assn. of Home Builders.

Sumichrast predicted that single-family construction will remain close to current levels but that multifamily construction could plunge by as much as 25%.

Other analysts also were pessimistic about apartment construction, citing high rental vacancy rates and negative effects on rental investment expected from the new tax law.

Commerce Secretary Malcolm Baldrige, commenting on the September construction figures, agreed that apartment activity will remain sluggish, but he said low mortgage rates will keep single-family construction at high levels.

The report on capacity utilization by the Federal Reserve Board said the industrial operating rate slipped more than a percentage point from a year ago as American manufacturers continue to suffer from a huge trade deficit. In addition, the oil and gas industry has slashed exploration activities because of the steep plunge in petroleum prices.

The 7.6% drop in housing construction, which followed a 2% August increase, was the biggest decline since an 8.2% fall in April.