Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.ibd From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: \TITLE Date: Fri, 20 Nov 92 13:33:51 EST Message-ID: <12.1992Nov20.133351@AmeriCast.com> 11/20/92 TITLE #m#gm#m##m#tlj#m#Housing Starts Tapered Off 1% In October But 1992 Total Is Still On Track For A 20% Gain Over '91 Robert Corrigan Construction of new homes fell 1.1% in October, with the tepid multifamily housing sector dragging down the overall number, the Commerce Department reported yesterday. Still, starts were 13.3% higher than they were in October of 1991. And the first 10 months of the year showed a 19.1% rise over the same period last year. Economists had been looking for a slight gain in the monthly figure, according to a weekly survey by MMS International. The decline "is a little disappointing, though not entirely surprising," said Michael Moran, chief economist at Daiwa Securities America in New York. "Lower in- terest rates have been giving starts some support, but the hous- ing sector won't see a strong comeback without a better labor market," he said. In another report yesterday, the Labor Depart- ment said that the number of Americans filing new claims for unemployment insurance rose 31,000 to 386,000 during the week ended Nov. 7, marking the largest increase in three months. Housing analysts note that interest rates are at 20-year lows and home prices have fallen or remain weak in many areas, making homes more affordable. But high unemployment nationwide and fear of losing jobs#m##m# are keeping the housing recovery weaker than it otherwise might be. Yesterday's housing report also said that applications for building permits rose slightly in October, by 1.1%, after increasing 4.6% the month before. The growth in per- mits indicates builder optimism about market conditions ahead, some economists say. The Commerce Department said that construc- tion of new single-family homes and apartments totaled 1.23 mil- lion units at a seasonally adjusted annual rate, down from a re- vised 1.24 million- unit rate a month earlier. All regions except the Midwest posted declines. September's total was revised down from a 1.26 million-unit rate, resulting in a 0.8% gain for the month instead of the 1.4% rise originally reported. Starts had risen a strong 12.1% in August, the fastest pace since the 19% increase in February 1991 at the end of the Persian Gulf war. Economists had warned that August's high level of growth could not be sustained through Housing Starts Tapered Off 1% In October the rest of the year. The beleagured multifamily sector in Oc- tober plunged 11.8% to an annual rate of 157,000 units. Apartment construction has fallen sharply in the past few years as tax benefits have been cut off and credit for builders has become harder to come by. Meanwhile, vacancies remain high in some areas. Single-Family Starts Up But the other major segment of the housing starts report - single-family housing - posted another gain, the third in as many months. Starts of single-family homes increased 0.7% in October to a 1.07 million-unit rate. The single-family sector "is where the recovery is," noted David Munro, chief U.S. economist for High Frequency Economics Ltd. in New York. He noted that with single-family home construction leading the way, overall starts this year should rise 20% over 1991 levels, to 1.25 million un- its. "A 20% rise in a usually cyclical sector is just fine. It's not glowing, but then nothing is glowing in this recovery. And I'm not sure we want a glowing recovery, because that has gotten us into inflationary problems in the past," Munro said. He predicts that with the help of low interest rates, starts will peak next year at 1.3 to 1.35 million units and could stay at about that level for several years. Meanwhile, rates have ticked up recently. Rates on 30-year fixed mortgages were up to 8.32% last week from 8.29% the week before, marking the fourth-straight increase, according to the Federal Home Loan Mortgage Corp. The 30-year rate has risen almost half a point in the last two months, since rates hit a 20-year low of 7.84% the first week of September. One-year adjustable ARM rates rose to 5.20% from 5.17%, marking five consecutive weeks of gains. Robert Vil- lanueva, director of forecasting at the National Association of Home Builders in Washington, added that October's small decrease in housing starts is consistent with a "continuing, moderate recovery" for the housing market. He noted that increased build- ing activity in the wake of Hurricane Andrew in Florida has yet to significantly affect housing statistics. Because of building delays, labor shortages and other factors, few of the estimated 20,000 homes destroyed by the storm are being rebuilt at present. Villanueva also said that NAHB's monthly survey of its members released Wednesday showed that potential buyer traffic in new homes nationwide has tapered off a bit. Twenty-three percent of NAHB members said traffic is high to very high, down a percentage point from the month before but up compared with the summer months. Sales expectations, however, are stronger. Of those sur- veyed, 38% said the sales outlook is "good," up from 32% the month before and 30% in August. Gain In Midwest By region, starts rose only in the Midwest, a 10.4% gain to a 307,000-unit annual rate. But they dropped 7.3%, to a 127,000- unit rate, in the Northeast, where starts had surged 23.4% a month earlier. That had been the largest increase in the region since a 31.5% gain in June 1991. Starts were off 4.8% in the South, to a 511,000-unit rate, and 2.4% in the West, to a 284,000-unit rate. This article is copyright 1992 Investors Business Daily. Redis- tribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM