Despite other signs of economic recovery, the number of residential building permits declined in November, according to new statistics from the Baltimore Metropolitan Council.
Permits issued in November 1992 for single-family units fell 6.2 percent compared with November 1991, while permits for apartment units plummeted 71.5 percent in November, the government group said.
Regional economists blame the declines -- which parallel the national trend for November -- on a variety of causes, including an October spike in mortgage rates and the relatively low cost of resale homes compared to new homes.
"The prices of used homes are low relative to new homes, and that's why people are concentrating their attention on purchasing a used home," said Steve Hanke, professor of applied economics at Johns Hopkins University.
Resale home sales picked up substantially in November in both the Baltimore region and the nation.
"Used housing is a good deal now compared to going out there and buying a lot and building a house. That's why we see such a complete slump in the new housing market," Mr. Hanke said.
But Michael Conte, a professor of economics and finance at the University of Baltimore, said the November drop in residential housing permits was related to what he called the "Clinton effect," the pre-election uncertainty that pushed up mortgage rates in October, before the presidential election.
Unlike Mr. Hanke, Mr. Conte believes the November figures for housing permits reflect a temporary problem in the new-home market.
"The residential market is really looking fairly optimistic generally, though November was a low point for permits," Mr. Conte said.
The same point of view was echoed by Robert Lefenfeld, a vice president with the Legg Mason Realty Group in Baltimore.
"Building permit activity is not a leading indicator, it's a lagging indicator of new home sales," said Mr. Lefenfeld, who says the mortgage
rate spike of October slowed consumer purchases in November.
Largely because of financing constraints, homebuilders have generally stopped building houses on a speculative basis. And builders typically do not take out a government building permit until they already have a committed purchaser for a new home, Mr. Lefenfeld said.
"Speculative building is basically dead," said Gary Blucher, president of the Home Builders Association of Maryland.
Mr. Blucher, construction manager for Carroll County-based Masonry Contractors, the homebuilding firm, said new-home sales have slowed for many builders recently because of the glut of resale homes.
Though the sales pace for used homes has risen in recent months, the supply of new homes still exceeds demand, Mr. Blucher said. That means many prospective new-home buyers have put contracts on new homes that are contingent on the sale of their old property. But many such prospects have been unable to sell their old homes.