September 26, 2005,
Housing Starts Sag for Second Month
In one more sign that the nation's housing market is finally edging into a long-anticipated cooling-off period, housing starts declined for a second straight month in August, declining 1.3 percent to a seasonally adjusted annual rate of 2 million units.
Hardest hit was the multi-family housing market, apartments and condominiums, where starts tumbled 7.5 percent to an annualized pace of 300,000. That's 10.7 percent below last year's pace, the home builders' trade group said. Single-family home starts were virtually flat during August, edging up just 0.1 percent, to 1.709 million units, about 1.2 percent ahead of the year-ago pace.
“The housing market still is in very good shape, although a modest cooling may now be under way,” said David Seiders, chief economist of the National Association of Home Builders. “Our surveys of builders show growing buyer resistance to elevated house prices in many areas, and anticipated increases in interest rates have tempered the housing outlook to some degree.”
In another sign of a weakening market, the number of building permits issued — a gauge of future building activity — declined 2.2 percent, to a seasonally adjusted rate of 2.1 million units. Single-family permits dipped 1.3 percent, while multi-family permits dropped off 5.5 percent.
Home Builders Grow More Cautious
The nation's home builders are growing antsy, and their confidence levels fell for a third month in September, dropping to their lowest level in more than two years.
The Housing Market Index sponsored by the National Association of Home Builders and Wells Fargo Bank dropped two points in September to a reading of 65, its lowest level since July of 2003. Builders' confidence has now subsided seven full points since a June reading of 72.
“Many builders appear to be taking on a more cautious attitude because of uncertainties in the economy and this post-Katrina environment, particularly with regard to sales expectations in the near term,” said David Wilson, president of the National Association of Home Builders.
Builders are also increasingly spooked by high home prices and rising interest rates, which could put the brakes on a long-running housing expansion fueled almost entirely by persistently low mortgage rates.
“As expected, the housing market is beginning to show signs of cooling, and builders are reacting to that,” said David Seiders, chief economist of the National Association of Home Builders.
“In general, concerns about rising interest rates down the line, some buyer resistance to the strong house-price appreciation we've seen for several years, higher gas prices — which not only drive up the cost of doing business but also cause some people to rethink their decision to live in further-out communities — and other factors such as lot shortages and high-impact fees for development, are all contributing to take a bite out of builder optimism going forward.”