Housing Construction in U.S. Falls to Weakest Rate in a Year
Construction starts on new homes and apartments slumped sharply in October to the slowest rate in a year, the Commerce Department said Tuesday, as the key housing sector steadily lost momentum.
Total starts dropped 5.1% last month to a seasonally adjusted annual rate of 1.366 million after a steep 6.1% fall in September. It was the weakest building rate since 1.351 million a year in October 1995.
All regions except the West shared in the decline. Starts were up 6.5% in the West, to an annual rate of 358,000.
Analysts said the sizzle was going out of the building industry after a hearty first half in which builders were hard-pressed to keep up with demand.
New applications for building permits declined for a third month in a row in October, hinting at a further waning in the pace of construction in coming months.
“During the third quarter we started to lose steam for sure and now we’re moving into the fourth quarter on a weaker note yet,” said David Seiders, an economist at the National Assn. of Home Builders.
“The hope now is that the recent fall in long-term [interest] rates will help to stabilize things,” he added.
Mortgage rates were lower in October than they were a month earlier, averaging 7.85% for a 30-year loan compared with 8.23% in September. Last week, average rates for a long-term mortgage were down to 7.59%.
Indeed, stock and bond prices rose on the report, which strengthened investor beliefs that an interest-rate increase could be avoided.
The housing industry has an overarching impact on the overall economy because it is a major employer and buying or building commitments spawn a range of spending, from purchases of building materials to furniture.
Meanwhile on Tuesday, the Federal Reserve Board reported that a November survey of senior loan officers found continued moderation in consumer demand for credit from banks.
Although many reported little change in demand for commercial and industrial loans, “several banks reported weaker demand from households, including demand for mortgages and for consumer loans,” the report said.
An August survey reported similar weakening in consumer demand.
The falloff in construction during October was widespread.
Building rates for single-family homes fell 4.6% to 1.069 million a year, the weakest performance since 1.036 million in June 1995. Starts on apartments dropped 7.2% to a rate of 297,000.
Overall growth in the national economy, measured by gross domestic product, throttled back to an annual 2.2% rate in the third quarter from a booming 4.7% in the second quarter.
Tuesday’s reports prompted U.S. home builders and dealers of building materials to call on the Clinton administration to repeal a trade agreement with Canada that restricts imports of lumber to the United States, because it is making U.S. homes less affordable.
Since the agreement was signed in April, U.S. lumber prices have increased by almost 20%.
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Housing Starts
Seasonally adjusted annual rate, in millions of units:
Oct. 1996: 1.37
Source: Commerce Department
