Housing Construction Continues Torrid Pace
Defying expectations of a slowdown, builders revved up construction of houses and apartments in December to the highest level in nearly two decades as the industry remained one of the economy’s most significant sources of growth, according to a government report released Wednesday.
Housing starts rose 1.7% in December from the previous month’s revised figure to a seasonally adjusted annual rate of 2.09 million houses and apartments, the fastest pace since February 1984, the Commerce Department said. The increase, much of it the result of a sharp run-up in apartment construction, surprised industry analysts, many of whom had expected a decline.
December capped one of the home building industry’s best years ever, despite projections that sales and construction would slow in the face of rising interest rates and the end of a multiyear housing boom. Housing starts in 2003 rose 8.4% from the previous year to 1.84 million units -- the highest figure since 1978.
The report helped drive up shares of home construction stocks, including such stalwarts as Westwood-based KB Home, which rose $3.09 to $70.90, and Newport Beach-based William Lyon Homes Inc., which gained $3.01 to $64.13, both on the New York Stock Exchange.
Shares of Calabasas-based Ryland Group Inc., whose stock dropped 12% recently after it said new-home orders fell 9% in the fourth quarter, rose 7% to $79.43, up $4.93, on the NYSE.
Most economic forecasts anticipate that home construction and sales activity will taper off this year, the prospect of which sent the shares of many home builders lower in recent weeks as they reported slowdowns in some markets. The National Assn. of Home Builders estimates that housing starts will decline nearly 4% this year.
However, the industry is expected to remain strong, churning out new houses and apartments at near-record levels, according to economists. One indicator: The Mortgage Bankers Assn.’s gauge of new loan requests to buy homes hit an all-time high last week.
“The growing economy, low interest rates and heavy order backlogs will keep housing starts strong in 2004,” said a report by Wells Fargo economist Sung Won Sohn.
The December report showed that single-family construction starts dipped 0.6% from the previous month. However, that decline was more than offset by a 15.7% increase in construction of apartment complexes.
On a regional basis, the South led the nation with a 7.1% gain in housing starts during December. The West was a distant second, with a 0.2% increase. Meanwhile, new construction activity dropped 6.7% in the Northeast and 4.3% in the Midwest.
The Commerce Department also reported a large increase in building permits, which are a strong indicator of future construction activity. Newly issued building permits rose 3.3% in December from the previous month to a seasonally adjusted annual rate of 1.92 million units.
