New Home Construction Up 1.4% in September : Housing: Despite the second increase in two months, few expect the market to rebound soon.

Construction of new homes and apartments across the U.S. rose a modest 1.4% last month, the Commerce Department said Tuesday, as strong increases in the Northeast offset declines in the West and Midwest.

Housing starts fell 7.3% in the West, reversing the trend in August when a 15.2% rise led the nation.

The September report marked the nation’s second monthly increase in a row as the lowest mortgage rates in two decades continued to draw first-time buyers to new housing tracts. Still, the modest increase persuaded few analysts that the nation’s battered housing market is set for a big rebound anytime soon.

“It usually takes three consecutive months of increases or declines to establish a trend,” said David Seiders, chief economist for the National Assn. of Home Builders. “It’s nice to see back-to-back increases, but it’s hard for me to get overly excited.

“Starts are still pretty low, unemployment’s still pretty high and personal income isn’t growing. The fundamentals we need for a housing recovery just aren’t in place right now.”

Housing starts were made at a seasonally adjusted annual rate of 1.256 million units in September, up from a revised 1.239-million rate in August. Building permits, a key barometer of future construction activity, rose 3.7% in September to an annual rate of 1.116 million units.

The September increase was fueled by a 24.6% rebound in starts in the Northeast. Construction there had dropped 6.7% in August. Starts rose 7.1% in the South but dropped 7.8% in the Midwest.

“Starts have been on a roller-coaster for the past several months,” said Ben Bartolotto, research director for the Burbank-based Construction Industry Research Board.

Bartolotto expects 98,000 new homes to be built in California this year, a 7.5% drop from 1991 and the lowest level of activity since 1982.

But he predicts that starts in the state will surge 29% next year, to 126,000 units, as the economy slowly improves and lenders overcome their jitters about financing new developments.

“Next year won’t be a ‘boom year,’ but it’ll be a lot better than 1992,” Bartolotto said.

Although overall construction activity in the West dropped last month, some builders fared better than others.

“The companies that build more expensive homes are suffering more than the companies that build entry-level houses,” economist Seiders said.

“First-time buyers looking for inexpensive homes are still in the market because rates are low and buying is nearly as cheap as renting. But people who would normally buy ‘trade up’ homes are scarce, because they can’t sell their current homes and they’re nervous about taking on bigger mortgage payments in this shaky economy.”

Indeed, companies that build starter homes under $100,000 or $150,000 say business is going well.

Kaufman & Broad Home Corp., the Los Angeles-based building giant that caters to first-time buyers, recently reported that it sold 1,200 California homes in the third quarter. That was a 171% increase from its 1991 third-quarter sales.

A record 4,200 people visited its 54 housing tracts across the state just last week, said Roger Menard, president of K&B;’s California operations.

“If there’s a slowdown, we’re sure not feeling it,” Menard said.

Housing Starts

Seasonally adjusted annual rate, millions of units:

Sept. ‘92: 1.26

Aug. ‘92: 1.24

Sept. ‘91: 1.02

Source: Commerce Department