Firm Housing Market Even as Rates Rise

The number of U.S. housing starts slid in August, but building permits and mortgage applications increased, according to reports showing a strong housing market despite a trend of rising interest rates.

“All of the data that we’re seeing in the housing market is incredibly encouraging. It suggests to me that the bump up in rates is not a threat to the housing market,” said Mark Vitner of Wachovia Securities.

Housing starts slipped 3.8% last month, the Commerce Department said Wednesday in a report showing generally higher interest rates on home loans were cooling buyers’ appetite for new homes.

However, the department also said permits to break new ground for single-family homes jumped 2.9% to a 1.475 million rate -- a record high -- as builders rushed to lock in building authorization before higher mortgage rates chase away buyers.

Also, mortgage applications rose last week, a Mortgage Bankers Assn. of America report said. Mortgage interest rates, however, have trended higher from four-decade lows recorded in June as markets began to anticipate the U.S. economic recovery gaining traction.

Low inventories of homes available for sale should support continued high levels of activity in the housing market, Vitner said.

“There’s nothing to suggest that builders are getting irrationally exuberant. They’re simply following demand,” he said.

Housing starts slid to a seasonally adjusted annual rate of 1.820 million from an upwardly revised 17-year high of 1.892 million in July, the Commerce Department said.

Starts fell 1.8% in the West and by 2.7% in the South, the two biggest regions for building. Starts fell 23.3% in the Northeast and rose 1% in the Midwest.