Baltimore-area home permits fell 13% in 1995 Commercial construction saw 102% rise in value

March 07, 1996|By Timothy J. Mullaney | Timothy J. Mullaney,SUN STAFF

The number of building permits issued for new homes in the Baltimore area fell 13 percent last year, the second-straight year that a leading index of the health of a key local industry has fallen, the Baltimore Metropolitan Council said yesterday.

Builders took out permits for only 11,009 new homes in 1995, a decline of 1,613 homes from the previous year. But the gloomy news for the residential sector was partly offset by a fairly optimistic report on commercial construction: The value of new commercial construction approved in 1995 jumped 102 percent.

"You always have variations from month to month," said Metropolitan Council economist Josef Nathanson, shrugging off a 25 percent decline in the value of new construction approved in December, compared with December 1994.

"I try to make less of the month-to-month data and focus on the larger trends," he said. "At the end of the year, nonresidential [construction] was on the upswing."

Economists watch building permits closely because they are considered an indicator of how the economy will perform several months in the future, when the newly permitted projects actually generate construction jobs.

This is especially true in Maryland because the state gets nearly 6 percent of its jobs from construction, a figure well above the national average.

Mr. Nathanson said the commercial sector is recovering well from the severe downturn of the early 1990s, even though it has yet to approach the explosive growth of the late-1980s peak.

But he said the much larger housing sector remains grounds for caution. Weak job growth, continued uncertainty over layoffs, and falling household formation due to the maturation of the "baby bust" generation are weakening demand in ways that don't show immediate signs of changing.

"No. 1 has to be continuing concerns about the job picture and stability," Mr. Nathanson said. "Another reason has to be changing demographics -- we have declining numbers of households headed by 25- to 34-year-olds, the prime first-time housing buyer."

Harvey Singer, a senior vice president of Legg Mason Realty Group Inc. in Baltimore and a leading expert on the region's new-home market, said new-home sales have actually been performing better than permit figures.

"The sales picture is not as bad as the permits show," Mr. Singer said, adding that new-home sales in Baltimore and surrounding counties jumped about 4.2 percent in 1995, driven by a big push late in the year from lower interest rates. "We're not wildly optimistic. We think sales will be at the 1995 level or mildly up."

Pub Date: 3/07/96

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