Housing Starts in April Fall to Lowest Point Since 1982

Housing starts fell in April to their lowest level since the last recession in 1982, the government said Wednesday.

Interest rates remained high and the availability of construction money fell. Analysts said the tight money situation was increasing housing costs and causing unemployment.

“The (lending) spigot has been turned off,” said Martin Perlman, president of the National Assn. of Home Builders. “The result will be higher housing costs.”

Perlman said the association had dropped its 1990 forecast from 1.42 million starts to 1.28 million, which would mean a loss of 200,000 jobs in the housing industry.

The Commerce Department said starts of new homes and apartments fell 5.8% in April to a seasonally adjusted annual rate of 1.25 million units, the smallest number since an annual rate of 1.17 million units in the recession month of October, 1982.

Applications for building permits--often a barometer of future housing activity--were down 8.7% to an annual rate of 1.13 million, the lowest level since 1.05 million were sought in September, 1982.

Analysts attributed the situation to high interest rates and a credit crunch caused by the savings and loan bailout law and tighter lending policies by commercial banks.

“That certainly must have given home builders a lot to think about before going out and starting new units,” said Richard Peach, an economist with the Mortgage Bankers Assn.

Mark Obrinsky, an economist with the Federal National Mortgage Assn., said new-home sales had been hurt by rising mortgage rates. But he noted that mortgage rates usually follow the pattern of long-term bond rates, which have been declining for several weeks.

“So my best guess is we’ll see some modest declines in mortgage rates over the remainder of the year,” he said.

After jumping 23.2% in January, the warmest January on record, housing starts have declined for three straight months--5.8% in April, 11.2% in March and 5.1% in February.

Single-family starts in April fell 7.5% to an annual rate of 934,000 units, the lowest level since a 931,000-unit rate in December, the fourth coldest December on record. Single-family starts had fallen 12.5% in March.

Apartment construction was unchanged at 311,000 units after falling 6.9% in March.

The only gain in starts was in the Midwest, where they were up 3.8% to an annual rate of 298,000 units.

Starts in the South dropped 8.7%, to an annual rate of 480,000. They were down 8.1%, to 340,000 units, in the West and 8%, to 127,000 units, in the Northeast.

The building activity means that the pace during the first four months of 1990 was 4% below that of the same period of 1989.

HOUSING STARTS

Seasonally adjusted annual rate, millions of units April,’90: 1.25 March,’90: 1.32 April,’89: 1.34 Source: Commerce Department