Flooring News and Information

Washington, DC, Nov. 19—Housing construction fell in October as builders displayed more caution in the face of sagging consumer confidence and rising unemployment. The Commerce Department said that last month builders broke ground on 1.55 million housing units at a seasonally adjusted annual rate, a 1.3% drop from September.

The decline, which came after a 0.8% increase, pushed housing starts to their lowest level in 10 months. All the weakness came from single family home construction, which fell by 1.2% in October, on top of a 1.1% decline the previous month.

Construction of apartments, condominiums and other multifamily housing rose by 1.9% last month, following an even bigger 3.4% gain.

The dip in overall housing construction reflects a climate of greater economic uncertainty for builders. Consumer confidence plunged in October to its lowest level in seven and a half years and the nation's unemployment rate jumped from 4.9% in September to 5.4%, factors that could make consumers less inclined to make big ticket purchases such as a home.

By region, housing starts rose by 5.3% to a rate of 140,000 in the Northeast. They grew by 14.3% in the Midwest to a rate of 328,000. But in the South, starts held steady at a rate of 744,000 and in the West, they dropped by 16.7% to a rate of 340,000.

Housing permits, a good barometer of current demand, fell by 3.6% in October to a rate of 1.47 million, the lowest level since December 1997.

Housing activity, aided by low mortgage rates, has helped support the nation's economy during its current slump. The average rate on a 30 year fixed rate mortgage in October was 6.6%, down from 7.8% for the same month a year ago.

Rates for 30 year mortgages dropped to 6.45% several weeks ago, the lowest level in 30 years of record keeping, Freddie Mac, the mortgage company had reported. But rates edged up last week to 6.51%.

Those low mortgage rates should help keep the housing market solid in the months ahead, according to economists.

Aftershocks of the September 11 terror attacks not only left consumers and businesses shaken, but led builders in October to be a lot less optimistic about their expectations for sales. However, their outlook has improved since then.

A survey by the National Association of Home Builders found that in November, builders were more confident about sales for the next six months. Still, builders are expecting housing starts and home sales to decline in the fourth quarter.

“We should expect about a 10% to 14% decline in housing in the fourth quarter,” says Bruce Smith, the association's president. “The market will flatten out in the first couple of months of 2002 before rebounding into positive growth territory in the second quarter. Historically speaking, this will be a mild and short downturn for housing.”