U.S. Housing Starts Dip 0.8% in December

Housing starts slipped 0.8% in December, ending an otherwise good year for the nation’s builders, who were helped by low mortgage rates and a thriving economy.

The December decline to a seasonally adjusted annual rate of 1.52 million units followed three consecutive monthly gains, the Commerce Department said.

Separately, the Labor Department said the number of applications for unemployment benefits fell by 13,000 last week to a seasonally adjusted 326,000. The unexpectedly sharp drop followed three consecutive increases that some economists had said was a sign that the labor market was cooling off a bit.

The number of housing units begun for all of 1997, 1.48 million, fell just 1,100, or 0.1%, short of the 1996 total, an eight-year high.

Last year, strong economic growth reduced the nation’s unemployment rate to a 24-year low and propelled a surging stock market. Both developments helped give Americans the wherewithal to purchase homes.

And declining mortgage rates, pushed down late in the year as investors pulled money out of Asia and snapped up U.S. securities, made home-buying more affordable.

Mortgage rates edged below 7% as 1998 began. They hit a four-year low of 6.89% last week and ticked up to 6.99% this week, according to the Federal Home Loan Mortgage Corp.

That’s fueled a record number of mortgage applications, said the Mortgage Bankers Assn. of America. Applications last week were 277% higher than the same week a year ago. Refinancings accounted for 69% of the total.

“We’re getting off to a running start . . . but you can’t sustain this type of pace forever,” said economist David Lereah of the association.

Declining mortgage rates also propelled the nation’s homeownership rate to a record high of 65.7% in 1997, beating the previous record of 65.5%, set in 1980, the Department of Housing and Urban Development said this week.

But, anticipating a slowdown, builders in 1997 didn’t quite keep up with the pace of new home purchases, which are believed to have risen about 6% to a 19-year high.

Analysts are looking for construction activity to slip this year, but not too much. A survey by the National Assn. of Home Builders showed that confidence remained high among builders in early January, about the same as a month earlier.

In December, single-family-home construction fell 5.9% while apartment building rose 15.4%. By region, starts tumbled 18% in the Northeast, fell 5.7% in the West and edged 0.6% lower in the South. They shot up 16.4% in the Midwest.

For the year, single-family home starts declined 2.4% while apartment construction rose 8.3%. Starts increased 3.5% in the Northeast and 1.5% in the South. They fell 5.6% in the Midwest and 0.8% in the West.

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Housing Starts

Seasonally adjusted annual rate, millions of units:

Dec.: 1.52

Source: Commerce Department