Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, November 18, 1993                   TAG: 9311180023
SECTION: BUSINESS                    PAGE: B-9   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

HOUSING BOOM HUMS

"When builders respond like this, it means they are anticipating solid demand," said economist David Lereah of the Mortgage Bankers Association

"The picture is not changing; it is just getting clearer," agreed Mark Obrinski, an economist with the Federal National Mortgage Association. "Low mortgage rates and a gradually improving economy continue to spark single-family construction, while still-high vacancy rates are holding back any substantial pickup on the multifamily side."

Construction of new homes and apartments rose 2.7 percent to a 1.4 million seasonally adjusted annual rate in October, the Commerce Department reported Wednesday. That was the highest since a 1.44 million rate in February 1990 and well above the 1.37 million rate many analysts had expected.

Advances in the Midwest and South offset losses in the Northeast and West.

"I think the dynamic making this possible is a big move out of rental housing," said David Seiders, an economist with the National Association of Home Builders.

Seiders said there is a big backlog of people who want to be homeowners but were prevented from buying during the late 1980s and early 1990s by high prices and interest rates.

Many analysts think mortgage rates will stabilize near the current level. If not, further escalation could curb sales, although some observers said recent increases probably stimulated purchases by consumers fearing even higher borrowing costs.

Still, builders appeared to be betting on stable rates in October. They boosted applications for building permits - a barometer of future activity - 2.8 percent, to a 1.31 million rate, the highest level since a 1.33 million rate in February 1990 and the fourth straight advance.

Starts of single-family houses shot up 5.8 percent, to a 1.22 million rate, highest since a 1.23 million rate in September 1987 at the peak of the previous building boom.

But apartment construction fell 14.9 percent, to a 172,000 rate, unable to sustain September's 39.3 percent jump. Starts of apartments with five or more units fell 20.2 percent, to a 138,000 rate.

Starts in the South advanced 2.8 percent, to a 590,000 rate.