Home Construction in West Jumps 15.6% : Building: The August figure pushes the nationwide rate to 7.8%, its highest in more than three years.


A sharp 15.6% jump in the West pushed the pace of housing construction nationwide to its highest level in more than three years last month, as builders stepped up production to take advantage of good weather and low mortgage rates.

Homes were built at a seasonally adjusted annual rate of 319,000 units in California and the 12 other Western states in August, the Commerce Department said Tuesday, up from 276,000 in July and 2.9% ahead of August, 1992.

Construction across the United States rose 7.8% to a 1.32-million rate from July and was 7.6% above its year-earlier levels.

“We’re finally seeing builders respond to the lowest mortgage rates in 25 years,” said Michael Carliner, chief economist for the National Assn. of Home Builders in Washington. “It’s about time.”


Rates on fixed, 30-year mortgages have been dropping steadily and recently fell below 7% for the first time since 1968. Despite the decline, construction in the first half of the year was surprisingly low because many developers postponed new projects until they felt better about the economy.

Carliner said Tuesday’s report, which shows the biggest month-to-month increase in a year, is the first strong sign that developers have grown more optimistic.

Construction climbed 10% in the Midwest and 6.4% in the South, but dropped 6.2% in the Northeast.

Permit applications for new projects, an important indicator of future activity, rose 6.9% in the West last month and 7.5% nationwide.


Some builders in the West--where California accounts for about half of all new production--said they were especially heartened that last month’s upswing in activity seemed to be spread out over most price segments of the market.

Construction of entry-level homes under $200,000 have remained relatively stable over the last few years, but sales of higher-priced homes have plunged because recession-wary buyers have been reluctant to take on bigger mortgages.

“Sales of our lower-priced homes remain pretty strong, but now we’re seeing that strength spread to our more expensive houses,” said Harold Lynch, president of Newport Beach-based home builder RGC Inc.

“Consumers seem to have a little bit of their confidence coming back, and low interest rates are letting them stretch their payments.”


Ironically, builders across the nation say they must now face a new threat to the industry just as the market seems to be picking up.

The Commerce Department last Friday threatened to nearly double the tariff on some types of wood imported from Canada, claiming that the Canadian government is providing far more subsidies to its wood producers than U.S. officials previously thought. The new taxes would raise the cost of a typical home by about $500, economist Carliner said.

Recent restrictions on logging have already pushed the price of lumber up about 25% over the last two months, which translates into a $1,125 increase in the cost of a new home, he said. Lumber futures soared again Tuesday morning on the Chicago Mercantile Exchange, which could put even more upward pressure on prices.

“Anything that raises prices tends to put a damper on new construction and sales,” Carliner said. “Higher tariffs wouldn’t kill the housing market, but it certainly wouldn’t help it.”


Housing Starts

Seasonally adjusted annual rate, millions of units:

August: 1.32 Source: Commerce Department