- The Washington Times - Wednesday, September 17, 2003


Housing construction slowed last month but remained close to a 17-year high, a sign that a recent upward swing in mortgage rates had done little damage to the resilient housing market.

Builders broke ground on 1.82 million housing units at a seasonally adjusted annual rate in August, a 3.8 percent drop from the previous month, the Commerce Department reported yesterday.

Housing construction had boomed in July, clocking in at a rate of 1.89 million units, the strongest monthly level of activity seen since April 1986.

“I would view the August thing as just kind of settling down a bit from the July exuberance,” said David Seiders, chief economist at the National Association of Home Builders.

Although some economists had raised concerns about the effect a rise in mortgage rates would have on the housing sector, “the constraining impact of higher rates seems like a pretty minor factor,” Mr. Seiders said.

In the middle of June, rates on benchmark 30-year mortgages slid to 5.21 percent, the lowest level in more than four decades. Shortly after that, they began a steady rise. Last week, however, rates on 30-year mortgages dropped to 6.16 percent.

Factors contributing to the increase in mortgage rates include signs that the economy is picking up speed and concern about swelling federal budget deficits, economists say. Those factors have pushed up bond rates, causing long-term mortgage rates to rise.

Economists, however, expect sales of both new homes and previously owned homes to hit record highs this year, even if higher mortgage rates slow activity in the coming months.

In August, work on new single-family homes declined by 4 percent from the previous month to a rate of 1.48 million units. Construction of multifamily housing, including apartments and condos, also fell by 4 percent last month to a rate of 308,000.

Housing construction plunged by 23.3 percent in the Northeast to a rate of 145,000. In the South, housing construction dropped by 2.7 percent to a pace of 851,000. In the West, housing starts dipped by 1.8 percent to a rate of 436,000. In the Midwest, however, housing construction increased 0.1 percent to a rate of 388,000.

In an encouraging note, housing permits — a good barometer of current demand — rose by 4.5 percent in August from the previous month to a rate of 1.89 million units, the highest level since December. Permits for single-family homes rose by 2.9 percent to a record high monthly rate of 1.48 million units.

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