Housing starts fell in May for the fourth consecutive month, dipping to their lowest level since the last recession, the government said yesterday.
Analysts, who said the decline was further evidence that the housing market continues to weaken, attributed the 1.4 percent fall to high mortgage rates, tight credit, a large inventory of new and existing homes, wet weather and a sluggish economy resulting in slackening consumer confidence.
The Commerce Department said starts of new homes and apartments totaled a seasonally adjusted annual rate of 1.21 million units, the smallest number since 1.17 million units in October 1982, at the end of the last recession.
Applications for building permits -- often a barometer of future housing activity -- also have fallen for four straight months, noted Martin Regalia, chief economist with the National Council of Savings Institutions.
Mortgage rates, which dropped into the single digits toward the end of last year, rose above the 10 percent level in January and ranged from 10.33 percent to 10.67 percent in May, according to surveys by the Federal Home Loan Mortgage Corp. Rates fell to 10.12 percent by last Friday.
David Berson, chief economist with the Federal National Mortgage Association, said declining rates may help the single-family home sector. But he said builder uncertainty over proposed federal regulations governing handicapped access to apartment buildings will continue to slow the multifamily sector.
John A. Tuccillo, chief economist for the National Association of Realtors, said many builders have had trouble getting construction loans because of the constraints of the savings and loan bailout law and tighter lending restrictions by banks.
Economist Richard Peach of the Mortgage Bankers Association noted that May was a very wet month in parts of the nation, but he also cited interest rates and large inventories of new and existing homes.
Part of the inventory problems, Regalia said, is the effect of the slowing economy on consumer confidence.
Construction of single-family homes in May fell 1 percent to an annual rate of 896,000 units on top of a 9.1 percent drop in April. It was the lowest number of single-family starts since 862,000 in December 1982. Apartment construction slipped 2.5 percent to an annual rate of 311,000 units after rising 2.6 percent in April.