Wednesday, September 20, 2000

Housing starts rise in August

The Associated Press

        WASHINGTON — A big jump in single-family home projects, supported by an easing of mortgage rates, caused all housing construction in August to rise for the first time in four months.

        Builders began work on new homes at a seasonally adjusted annual rate of 1.53 million last month, a 0.3 percent increase from July, the Commerce Department said Tuesday.

        Construction of single-family homes rebounded last month, rising 4.6 percent to a rate of 1.26 million, the first increase since March.

        “The rebound was pegged primarily to interest-rate improvements,” said David Seiders, chief economist for the National Association of Home Builders. “By August, rates were dipping below 8 percent, clearly reviving home-buying demand.”

        In the last two weeks of August, the average rate on a 30-year fixed-rate mortgage fell below the 8 percent mark. For the month, 30-year rates averaged 8.03 percent, down from 8.15 percent in July. Still, August's rate was considerably higher than the 7.94 percent average rate in August 1999.

        The Federal Reserve has boosted interest rates six times over the last 15 months to slow the economy and keep inflation under control. The Fed's rate increases are designed to make borrowing more expensive and reduce demand for big-ticket items such as homes and cars.

        The interest-rate-sensitive housing market has been an engine of the vibrant economy. The increases in interest rates over the past year have moderated housing activity, but it still remains healthy, economists said.

        Housing construction in August was running 7.6 percent lower than August of last year.

        “The steam has been let out of the housing market, but the souffle has not gone flat,” economist Joel Naroff said. “Few builders will be crying that a recession is upon us, though the gravy days of 1999 are gone.”


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