Home building hit 3 1/2 -year high in Oct.

November 18, 1993|By New York Times News Service

WASHINGTON -- Responding to a revived housing market, builders broke ground on homes in October at the fastest rate in more than 3 1/2 years, causing analysts to raise projections for the economy at large.

The 2.7 percent rise in housing starts was the latest in what has become an almost unbroken streak of upbeat economic reports during the past two months.

And it indicated that housing, which showed little sign of life during the first half of the year despite falling interest rates, had resumed its traditional role as an economic pacesetter.

"Finally, we're getting pretty happy with these numbers," said David Lereah, chief economist for the Mortgage Bankers Association. He and others said that many apartment dwellers, inspired by the most favorable combination of financing costs and home prices in decades, had decided to become homeowners.

At a White House briefing, Treasury Secretary Lloyd Bentsen called the comeback in housing, to a level 13 percent above that of three months ago, "a payoff with what we did on the budget and getting the cuts in that deficit and now getting the long-term low interest rates."

Overall, starts ran at a seasonally adjusted annual rate of 1,396,000 in October, 14 percent above the year-earlier pace, the Commerce Department report showed. For single-family houses the gain was 5.8 percent, to a rate of 1,224,000.

The rebound in housing has lifted single-family construction back to the levels enjoyed during the 1980s. The 1.1 million houses now expected to be built in 1993 would be the most since 1,146,000 in 1987 and would be not far under the decade's best performance, 1,180,000 in 1986.

Because of a collapse in multifamily activity, however, current levels are far short of the 2.4 million total units in 1972, the industry's best year. The slump resulted from over building, changes in the tax law and lower government subsidies.

"Building activity seems clearly to be driven by the demand," said David F. Seiders, chief economist for the National Association of Home Builders, noting that there had been relatively little speculative construction or rise in unsold homes.

He added that all three of his association's surveys -- of customer traffic, current sales and builders' expectations for future sales -- stood at the highest levels since they were introduced in early 1985.

Yesterday's Commerce Department report, which exceeded most expectations, also showed that permits for future construction rose 2.8 percent last month, the fourth straight advance.

The October groundbreaking was concentrated in the Midwest, part of which is rebuilding from summer floods, and in the South.

But while the Northeast and West posted small declines, both regions had had brisk activity in preceding months.

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