After hitting an 11-year high, construction of homes and apartments dipped in August but remained on track for a banner year with mortgage rates at a nearly three-decade low.
The Commerce Department said Friday that construction of homes and apartments fell 5.5 percent last month to a seasonally adjusted annual rate of 1.61 million units.While the August setback was the biggest decline in 20 months, analysts noted that it was occurring after construction activity had surged to an annual rate of 1.71 million units in July, the fastest pace since March 1987.
Even with the decline, housing activity in August was 16.6 percent above the level of a year ago, reflecting a surge in activity propelled by falling mortgage rates and low unemployment.
``This will be the best year for housing since 1987,' said David Seiders, chief economist at the National Association of Home Builders. ``We have had the best of all possible worlds with great job growth, consumer confidence close to record levels and interest rates coming down.'
While the currency crisis that began in Asia last year and now has spread to Russia and Latin America has caused foreign currencies to plummet and rattled the U.S. stock market, it has been a boon for the U.S. bond market as a flood of foreign money seeking a safe haven has pushed down interest rates.
This week a national survey showed that 30-year mortgages have now fallen to 6.66 percent, the lowest level since Freddie Mac, the mortgage company, began its survey in 1971.
The low rates have pushed sales of both new homes and existing homes to record levels already this year. But with the Asian crisis starting to be felt more in the United States, both in rising unemployment in manufacturing and in falling stock prices that have shaken consumer confidence, some economists said the boom in housing may slow in coming months, despite the low mortgage rates.
``We expect the economy to be on a slow-growth path,' said Karen Dexter of Merrill Lynch in New York. ``Housing starts should remain strong but activity has probably peaked.'
For August, construction of single-family homes declined 4.2 percent to an annual rate of 1.25 million units. Construction of multifamily units dropped an even sharper 9.5 percent to an annual rate of 368,000 units.
The declines hit all regions of the country, with the West suffering the biggest setback, a drop of 8.6 percent to a seasonally adjusted annual rate of 394,000 units.
Housing construction in the Northeast was down 7.3 percent to an annual rate of 139,000 units. The South, which accounts for nearly half of all new home and apartment construction, saw activity drop by 4.3 percent to an annual rate of 771,000 units.