By Tomoeh Murakami Tse
Washington Post Staff Writer
Friday, January 20, 2006; D02
In the latest sign that the housing market may be slowing, construction of new homes fell sharply in December, the government reported yesterday.
The annual pace of housing starts last month was 1.93 million, the first time since March that it dropped below 2 million, according to the Commerce Department. The December figure was down 8.9 percent from the previous month and down 5.7 percent from December 2004.
"It definitely is another sign that the housing market is trending down from peak levels," said Lawrence Yun, a senior economist at the National Association of Realtors, a trade group.
Building permits also dropped, by 4.4 percent from the previous month and 0.6 percent from December 2004. Permits were up 3.4 percent for the whole year, to 2.14 million.
Analysts cautioned against reading too much into month-to-month changes -- in November, for example, housing starts rose compared with October. They also said the latest figures still reflect healthy building activity. Preliminary numbers show new housing starts for the entire year were up 5.6 percent from 2004, to 2.06 million -- the second-highest ever, after 1972.
And during the year, builders began construction on 1.71 million single-family houses, the highest number ever. Single-family houses accounted for 83 percent of the starts last year.
"Clearly we have surpassed 2004, which a lot of people didn't think we were going to do," said Kenneth Wenhold, Virginia and Maryland director for Metrostudy, a Houston-based real estate firm that specializes in the new-home market. "Assuming that our job growth remains strong locally . . . we could be in for another strong year."
In the South, which includes the Washington region, housing starts rose 5.2 percent from November, although starts of just single-family homes were down 4.2 percent. Nationwide, multifamily housing starts climbed 11 percent, the report said.
Wenhold said that surprised him, because construction of multifamily units has slowed significantly in Northern Virginia, which has the largest share of the region's condos. Condo starts in Fairfax and Arlington counties dropped by the thousands in 2005, and resale listings for condos in those two counties are up by more than 500 percent from a year ago, Wenhold said.
The Commerce Department housing start figure for the nation carries a margin of error of more than 8 percentage points. For the South region and for multifamily housing, the margin is much higher.