Housing Starts Fall 4th Month in Row

Housing construction fell for the fourth consecutive month in June, posting the longest string of declines in six years, as builders continued cutting back following a jump in mortgage rates this spring, the government reported Friday.

The Commerce Department said construction of new homes and apartments dropped 0.7% in June to a seasonally adjusted annual rate of 1.59 million units.

The four-month decline was the longest since mid-1981, during the last recession, and it pushed down the rate of home building to its lowest level since August, 1984.

Many analysts expressed hope that the worst is now over because mortgage rates, after rising rapidly in April and May, have edged back to levels where home buyers should be willing to enter the market again.

Fixed-rate mortgages declined to a nine-year low of close to 9% at the end of March, before investor fears about a weak dollar and renewed inflation sent rates up sharply. Fixed-rate mortgages shot up almost 2 percentage points, hitting 10.8% on May 22.

But since that time, rates have been steadily declining. The Federal Home Loan Mortgage Corp. reported Friday that its weekly nationwide survey showed rates had now fallen to 10.23%.

Commerce Undersecretary Robert Ortner predicted that further mortgage declines “should spur single-family starts this summer and fall.”

Analysts noted that building permits, a good sign of future activity, were up a modest 1.6% in June to an annual rate of 1.51 million units. It was the first increase in permits since March.

“After the spring rate shock, things are bottoming out and the worst appears to be over,” said James Christian, chief economist for the U.S. League of Savings Assns.