Housing Starts Slowing Down
Wednesday, July 20, 2005
Builders began construction on fewer single-family houses in June, a possible sign that years of strong growth in the national housing market may finally be leveling off.
Overall, new housing starts, which include apartment buildings and condominiums, were flat.
The new housing figures, released yesterday by the Commerce Department, bolster the view of economists who have predicted a gradual slowdown in housing starts and an easing of price increases as mortgage rates tick up with the prospect of passing the 6 percent mark by next year.
Washington area markets have been among those posting strong gains, with prices rising across the region around 16 percent annually over the past three years, said Brenda B. Shipplett, president and chief operating officer of Long & Foster Cos., a closely held brokerage and real estate services company based in Fairfax.
Shipplett said her company has seen some moderating in what was an overheated market. These days, properties can linger as long as a week, compared with selling on the first day on the market a year ago, with fewer multiple offers and bidding wars, she said.
"We like a saner market place," she said. "We're not happy when 10 people bid, and nine lose out."
Nationally, coastal markets, especially in Florida, have seen prices escalate far faster than those in the heartland and remain most vulnerable to a significant pullback in prices, possibly in the 10 percent range, some economists say.
"We see a slowing in home-price appreciation," said Celia Chen, director of housing economics for Economy.com, a West Chester, Pa., research firm. "But some markets could see a significant decline."
Homeowners in recent years have watched with satisfaction as prices nationally rose at a double-digit pace, while some markets, including Phoenix, Southern California and parts of Florida, experienced annual price increases of 30 percent or more.
Low yields on stocks and bonds have fueled the growth as investors poured money into real estate of all kinds -- single-family houses, apartment buildings, offices and shopping malls, and even real-estate stocks, which posted average returns of more than 30 percent per year in 2003 and 2004 before leveling off this year, according to the National Association of Real Estate Investment Trusts, a Washington-based trade group.
Real-estate price gains have been credited with everything from fueling strong consumer spending, as homeowners have taken equity out of the homes in a refinancing boom, to creating a new class of real-estate speculators, to spawning a universal topic of middle-class dinner-party conversation.
"People have been talking, talking, talking about real estate as a way of getting rich," said William Cheney, chief economist at John Hancock Financial Services Inc., Boston, who calls the chatter a worrisome sign.