THE VIRGINIAN-PILOT 
              Copyright (c) 1994, Landmark Communications, Inc.

DATE: Thursday, July 21, 1994                TAG: 9407210765
SECTION: BUSINESS                 PAGE: D01  EDITION: FINAL 
SOURCE: By MYLENE MANGALINDAN, STAFF WRITER 
                                             LENGTH: Short :   48 lines

IN JUNE, 1 EFFECT OF HIGHER RATES: HOUSING STARTS FELL

The number of residential housing permits dropped in Hampton Roads, mirroring the national decrease in new construction in June.

Rising mortgage rates are being blamed for the slide.

The Commerce Department said Wednesday that housing starts tumbled 9.8 percent in June to a seasonally adjusted annual rate of 1.35 million, down from a revised 1.5 million in May.

Most cities in Hampton Roads reported fewer residential permits issued for June, according to the Builders and Contractors Exchange Inc. Only Portsmouth showed an increase in residential permits. Virginia Beach and Suffolk statistics were unavailable.

David F. Seiders, an economist with the National Association of Home Builders, said recent member surveys have produced ``an ongoing erosion of market tone in terms of buyer traffic and both current and future sales.''

Seiders and others attribute the erosion to higher mortgage rates, since other areas of the economy - including incomes, employment and consumer confidence - are improving.

Thirty-year mortgage rates climbed to 8.72 percent last week, up from 7.13 percent at the end of last year, according to the Federal Home Mortgage Corp.

``There have been fairly cautious moves by builders, particularly with the lack of real estate finance,'' said Louis L. Tourgee, division vice president for CTX Mortgage Co. in Virginia Beach. ``It's a paradox because interest rates are very low. But you don't have enough confidence from the move-up buyer.

``People are glued to their existing positions.''

June housing permits, an indicator of future activity, plummeted 58 percent in Newport News to 42 permits; Chesapeake permits fell 26 percent to 175 permits; Hampton permits decreased 23 percent; and Norfolk fell 8 percent.

Nationwide, construction tapered off everywhere except in the Northeast, which showed a 4.5 percent increase in building.

Applications for building permits fell 3 percent in June to a rate of 1.32 million, down from 1.36 million a month earlier. It was the second straight drop. Permits often are a barometer of future housing activity. MEMO: The Associated Press contributed to this report.

by CNB