Housing Data Reinforce Optimism

Groundbreaking on new U.S. homes slowed in October, but not as much as economists expected, the government said Monday in a report that reinforced guarded optimism about the economy.

Housing starts fell 1.3% last month to an annual rate of 1.552million from 1.572 million in September, the Commerce Department said.

“The housing market may be fading, but it’s not falling apart,” said Joel Naroff of Naroff Economic Advisors in Holland, Pa.

Naroff noted that the housing report dovetailed with other recent data--such as a 7.1% surge in October retail sales--that suggested the economy is holding up better than expected despite the shock from the Sept. 11 attacks.

Many analysts believe that the U.S. economy is in a recession, with its woes worsened by the blow to consumer confidence from the attacks.

But the housing data and other reports have added to beliefs that the economy could begin to stabilize soon and possibly begin a recovery early next year.

Cheaper mortgage rates are enticing some buyers, although some of the boost to the housing market from the low rates has been offset by the fact that layoffs are mounting, crimping consumers’ ability to qualify for mortgage debt.

“We are seeing some softening in demand for housing along with the recession that we’re in,” said Paul Kasriel, chief economist at Northern Trust Co. in Chicago. “Though it is weaker, housing is holding up reasonably well.”

Freddie Mac, the quasi-private housing finance agency, reported last week that 30-year mortgage rates averaged 6.51% on fixed-rate loans for the week ended Nov. 16.

Even though the number of housing starts nationwide declined, they rose in two of the four regions of the country.

They surged 14.3% in the Midwest and rose 5.3% in the Northeast. Starts were flat in the South and plummeted 16.7% in the West.

The Commerce Department’s latest report did offer one indication that housing demand might be poised to slow: The number of permits issued for private residential construction fell sharply.

Permits declined 3.6% to an annual rate of 1.473 million in October, the weakest since December 1997.