Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 21, 1994 TAG: 9404210226
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
David Seiders, an economist with the National Association of Home Builders, said a late March-early April survey of 455 members found many expressing concern over the increased cost of mortgages.
``Obviously, builders are aware of how important rates are to their businesses,'' he said.
After spiking to a 1.61 million annual rate in December, housing starts plunged 21.2 percent in January, to 1.27 million, because of the harsh winter. Continued inclement weather held the rebound in February to a 3.4 percent gain, to 1.31 million.
But with arrival of more temperate weather in March, starts jumped 12.1 percent, to a 1.47 million rate, the Commerce Department said Wednesday. That was even higher than the 1.41 million rate many analysts expected.
Every region in the nation posted gains, led by a 30.4 percent jump in the Midwest.
``If rates had not gone up, March would have been even better,'' Seiders contended.
According to surveys by the Federal Home Loan Mortgage Corp., rates averaged 7.75 percent in March, up from 7.14 percent a month earlier. They hit 8.47 percent two weeks ago, but dipped back to 8.26 percent last week.
Treasury Secretary Lloyd Bentsen also expressed concern Tuesday over higher long-term interest rates, which he contended could curb overall economic growth.
Bentsen told a Senate Appropriations subcommittee the Federal Reserve's recent boosts in short-term interest rates were anticipated and are not likely to derail the expansion.
But he added, ``I don't see the justification for the increase in long-term rates. ... As the markets stabilize, hopefully, long-term rates will drop down to a more normal level.''
Robert Davis, an economist with the Savings and Community Bankers of America, agreed higher mortgage rates ``will have a moderating effect on demand'' for new houses.
But he said that could be offset in the near term by potential home buyers accelerating their purchases out of fear of further increases in mortgage costs.
Many analysts believe mortgage rates will fluctuate between 8 percent and 8.5 percent until later in the year, when they will begin to moderate.
But despite the anticipated improvement, housing starts are not expected to again reach the 1.61 million pace of last December, which analysts consider the peak of the current business expansion.
Seiders now is forecasting 1.39 million starts this year, down from 1.43 million in January, and is ``poised to make another forecast cut if the financial markets do not settle down.''
Still, that would be more than the 1.29 million starts in 1993. Starts during the first three months of the year already are 20.6 percent above those of the same period in 1993.
Applications for building permits, often a barometer of future activity, rose 5.1 percent in March, to a 1.31 million rate, after falling for two straight months.
Construction of single-family homes shot up 11.3 percent in March, to a 1.25 million annual rate, after a 0.4 percent loss a month earlier. It was the highest level since a 1.38 million rate in December.
Apartment construction also rose, up 16.5 percent to a 226,000 rate, after jumping 32.9 percent the previous month. It too was the highest level since December, when multi-family starts hit a 229,000 rate.
by CNB