Home Building Slows to Lowest Rate Since 1993
Thursday, October 18, 2007
Housing starts nationwide sank to a 14-year low last month as concern grew about the effects the faltering industry could have on the U.S. economy.
"The latest starts figures just indicate how weak the housing industry is," said Celia Chen, director of housing economics for Moody's Economy.com. "Builders are really pulling back in construction. They don't see much demand."
Figures released yesterday by the Commerce Department showed that housing starts dropped 10.2 percent, to a seasonally adjusted annual rate of 1.191 million, compared with 1.327 million, the revised estimate for August. Last month's figure is 30.8 percent below the rate in September 2006.
Some industry analysts said the drop in housing starts in September, to the lowest level since March 1993, was greater than expected. Others said it was in line with their forecasts.
The September statistics also showed that building permits, a sign of future construction, dropped 7.3 percent from the revised August rate and 25.9 percent compared with September 2006.
The statistics came days after Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry M. Paulson Jr. delivered speeches predicting that the housing slump would hurt the broader economy next year.
There are other tentative signs that the weakness in housing is spreading, according to a report by the Federal Reserve yesterday. Its "beige book," a roundup of anecdotal reports about business conditions around the nation, presented a mixed picture.
The report said consumer spending grew in September and early October but more slowly than it had in August. In much of the country, "the expansion was variously characterized as 'moderate,' 'modest' and 'mixed,' " the report said.
The report's overall tone -- that the housing sector is in rough shape but that other sectors seem to be growing -- offers grist both for those who think Fed policymakers should keep interest rates steady when they meet in two weeks and for those who think they should cut rates.
Sen. Charles E. Schumer (D-N.Y.), chairman of the Joint Economic Committee, who has regularly accused the Bush administration of doing too little to address the housing problem, reacted critically yesterday.
"How long does the housing sector have to decline before the administration takes action to slow the pace of home foreclosures, which are taking a toll on families' main source of wealth at a time when they can least afford it?" Schumer said in a statement.
Economists said mortgage industry problems and tight credit were key factors in the decline in housing starts.