Construction of Homes Up Slightly in August

Construction of new homes rose in August for the fifth straight month, but the increase was the smallest since the housing industry began its rebound from a winter slump.

Analysts said the 0.6% advance signaled the beginning of an expected plateau in housing activity.

“I wouldn’t expect construction activity to accelerate further,” said economist Michael Carliner of the National Assn. of Home Builders. “It will remain strong, but I don’t expect to see further growth at this point.”

David Lereah, an economist with the Mortgage Bankers Assn., also predicted that housing activity will continue at its current level--if mortgage rates remain low.

“Interest rates have dropped,” he said. “That brings people to buy homes, and when they buy homes, builders build homes.”

Housing starts totaled a seasonally adjusted 1.398 million annual rate, up from 1.390 million in July, the Commerce Department reported this week. The advance was far slower than the 7.1% jump in July.

Regionally, starts shot up 9.2% in the Midwest, to a 308,000 annual rate. They were up 1.7% in the Northeast, to 117,000, and 0.3% in the West, to 329,000.

But they fell 3.2% in the South, to a 644,000 rate, after jumping 16.7% a month earlier.

The overall increase boosted the pace of new construction to the highest level since a 1.545-million rate last December, when many analysts believe the current housing cycle peaked.