Construction of New Homes Off 2.2%
Construction of new homes and apartments fell 2.2% in September and appears headed for its worst year since 1945, despite a five-month mini-boom earlier this year, the Commerce Department said Friday.
Analysts blamed the decline on the sluggish recovery, weak job market and widespread uneasiness about job security.
The decline heightened concerns that the economy is in for the second dose of a double-dip recession.
“I really think it’s panic-button time,” said David F. Seiders, chief economist for the National Assn. of Home Builders. “The fallback theory now is quite a serious possibility.
“Demand has clearly stagnated, there’s no question,” Seiders said.
Daryl Delano of Cahners Economics, a Newton, Mass., forecasting service, called the latest report “worrisome” and said: “The economy could stall out . . . and give us the classic double-dip.
“But,” he added, “I don’t think that will happen. I think the economy is idling now and will move forward eventually.”
The annual rate of construction starts in September was a seasonally adjusted 1.03 million units, somewhat lower than expected, the department said.
So far this year, starts are 19.5% below the same period last year. They fell 13.3% in 1990.
The September decline followed five straight monthly gains, including a 0.7% rise in August. It was the first time in 11 years that starts had risen at least five months in a row.
The latest data show that the home-building sector is languishing even though mortgage rates have fallen since late July. As of last week, the national average for 30-year, fixed-rate mortgages was 8.82%.
“These are the best mortgage rates we’ve seen in 14 years,” said economist Mark Obrinsky of the Federal National Mortgage Assn., or Fannie Mae. “That’s not where the problem is.
“Until we see some more sizable job gains, we may not see any more consumer spending on big-ticket items, and that certainly would include housing,” Obrinsky said.
Home building is an important sector of the economy because of the jobs and spending it generates. It has traditionally been a leader out of recession.
During the first three quarters of the year, housing starts were running at fewer than 1 million units a year--the lowest level since 1945, the final year of World War II, a department official said.
Construction of single-family homes fell in September by 2% to a seasonally adjusted annual rate of 868,000 units, while apartment construction, which has been in a downtrend for years, fell 2.9% in September to a rate of 165,000 units.
Economist Dick Peach of the Mortgage Bankers Assn. said the declines last month would have been worse were it not for declining mortgage rates.
Despite waning consumer confidence, Peach said his group’s recent weekly surveys of home mortgage applications show a modest pick-up in demand that should help housing starts.
“We now view this kind of stall in the housing sector in the third quarter as a temporary interruption” he said.
One promising sign in the government’s September report was a 2.7% rise in building permit applications, which indicate future building plans.
Permits for single-family homes rose 1.4% to a 780,000-unit rate in September. Permits for apartments rose 8.2% to a 199,000-unit rate.
Regionally, housing starts fell 3.5% last month in the Northeast, 4.5% in the Midwest and 5.6% in the West. They rose 1.6% in the South.
The number of houses actually started in September fell to 87,800 before seasonal adjustment from 95,200 in August and 93,100 in September, 1990.
Housing Starts
Seasonally adjusted annual rate, millions of units
Sept., ‘91: 1.03
Aug., ‘91: 1.06
Sept., ‘90: 1.11
Source: Commerce Department
