Construction of new homes rose modestly in December over November to a seasonally adjusted annual rate of 1.59 million units, the Commerce Department reported yesterday, making 1984 the best year for builders since 1979.
Some 1.74 million new homes were built in 1984, according to the government's preliminary estimates, 2.4 percent more than the 1983 total of 1.7 million and the highest figure since 1979, when 1.75 million homes were built.
The December rate for new-home construction was 2.1 percent higher than the November rate, but down from the 1983 December rate of 1.69 million units. The pace of housing starts was strong in the spring, but weak in the summer, followed by a mild recovery in late fall as mortgage rates dropped from the 15 percent high of summer to the 13 percent range.
Building permits, one barometer of future building activity, fell slightly by 0.2 percent in December to a seasonally adjusted annual rate of 1.59 million units. But, because of a strong 12.2 percent increase in November, analysts still are predicting construction gains in January.
"Sharp declines in mortgage rates are beginning to revive homebuilding activity," Commerce Secretary Malcolm Baldrige said. "Continuing growth in the economy, low inflation and the lowest mortgage rates since late 1983 are a good foundation for housing starts in 1985."
Many industry analysts echoed the Reagan administration's optimism for continued steady home construction into 1985, saying that the first three months are expected to average an annual seasonally adjusted rate of 1.7 million new housing units.
"Housing has been out in front of this economic expansion for the past two years, building more than 3.4 million new units," said Peter Herder, president of the National Association of Home Builders. "Conventional fixed-rate mortgages are now slightly below 13 percent in many areas of the country, and NAHB's most recent builder surveys show a modest pickup in sales and in the number of prospective buyers looking at new homes."
Michael Sumichrast, chief economist for the NAHB, said that the December figures for building permits, and single-family homes in particular, showed "a strong response from builders," and that, in response to the December figures, his association has revised its 1985 forecast up to 1.65 million new housing units.
Most analysts cautioned, however, that there could be a drop in the number of new starts in the second half of 1985 if interest rates start to rise again, as some analysts expect they will by late spring.
"This recovery is a recovery of single-family homes," Sumichrast said. "Town houses are not doing well, and condominiums are bad to terrible."
The Northeast saw a drop in the rate of home starts in December, while construction was up by 19 percent in the South and by 10 percent in the Midwest.
Some analysts said that the December figures were "slightly less than expected." They attributed the lower figures to a 4.7 percent drop in the number of multifamily units started last month.
"This is one of the side effects of the various tax proposals that would change the economics of building multifamily projects," said Timothy Howard, economist for the Federal National Mortgage Association.