Housing Starts Decline 2.7 Percent in July as Permits Hold Steady

Aug. 30, 2002
In line with expectations, the pace of nationwide housing starts slowed 2.7 percent in July to a seasonally adjusted annual rate of 1.65 million units,

In line with expectations, the pace of nationwide housing starts slowed 2.7 percent in July to a seasonally adjusted annual rate of 1.65 million units, the Commerce Department reported. This rate is exactly on pace with the number of starts that the National Association of Home Builders (NAHB) is forecasting for the year as a whole. Meanwhile, permits for new housing construction remained virtually unchanged in July at a 1.7 million-unit rate.

“Builders were finally able to take a breather following the breakneck speed at which they were filling orders in this year's first half,” said Gary Garczynski, NAHB president and a builder/developer from Woodbridge, Va. “But I'd caution anyone against linking today's report to some kind of housing ‘bubble.’ Historically low mortgage rates continue to bring buyers to the market. Moreover, we're forecasting a healthy 1.65 million starts for all of 2002 — the best number in 15 years.”

Garczynski said that to hit the NAHB forecast, some slowdown was inevitable from the average 1.69-million-unit pace set in the first two quarters.

Single-family housing starts declined 2.2 percent to a seasonally adjusted annual rate of 1.32 million units in July. This was only slightly lower than the average 1.33-million-unit rate set in the second quarter. Meanwhile, multifamily starts declined 4.7 percent to a rate of 328,000 units. This compares to a second-quarter average of 337,000 units.

Overall housing starts declined 11.7 percent in the Northeast, while the South and West reported more modest declines of 3.6 percent and 4.3 percent, respectively. As the exception to the rule, the Midwest posted a 5.8 percent gain in housing starts.

Meanwhile, building permits, which can be an indicator of future building activity, rose in three out of four regions in July. The Northeast, Midwest and West posted gains of 3 percent, 1.5 percent and 0.5 percent, respectively, while the South posted a 2.5 percent decline.