U.S. home build­ing falls

The Mercury (Pottstown, PA) - - BUSINESS - By Christo­pher S. Ru­gaber

WASH­ING­TON » U.S. builders broke ground on fewer homes last month, led by a drop in apart­ment con­struc­tion.

The num­ber of new hous­ing starts de­clined 2.6 per­cent in Jan­uary to a sea­son­ally ad­justed an­nual rate of 1.25 mil­lion, the Com­merce De­part­ment said Thurs­day. The drop came af­ter a much larger gain the pre­vi­ous month. Sin­gle fam­ily hous­ing starts rose 1.9 per­cent, while apart­ment build­ing dropped 7.9 per­cent.

Even with the de­cline, new home con­struc­tion has in­creased 10.5 per­cent in the past year. That gain has been fu­eled by ris­ing de­mand for homes as more Amer­i­cans are look­ing to buy. Most econ­o­mists saw Thurs­day’s re­port as a sign that higher mort­gage rates aren’t yet drag­ging down the hous­ing mar­ket.

Many po­ten­tial buy­ers are frus­trated by a lack of avail­able prop­er­ties. The sup­ply of ex­ist­ing homes fell in De­cem­ber to its low­est level since 1999. That has pushed up prices as buy­ers have had to bid against each other.

Home builders have re­sponded by ramp­ing up con­struc­tion, but the in­creases haven’t been fast enough to re­lieve sup­ply short­ages.

In a pos­i­tive sign, build­ing per­mits, a gauge of fu­ture con­struc-

tion, rose 4.6 per­cent last month, led by a big gain in apart­ment per­mits. Sin­gle­fam­ily per­mits fell.

“The big uptick in per­mits should be good news for in­ven­tory-con­strained home­buy­ers, as per­mits even­tu­ally be­come starts, which in turn be­come new homes for sale,” Ralph McLaugh­lin, chief economist for real es­tate data provider Tru­lia. “As a re­sult, we shouldn’t be sur­prised to see a strong uptick in starts in

mid-2017.”

Ris­ing prices, a tight sup­ply of homes and higher mort­gage rates com­bined to slow sales of ex­ist­ing homes in De­cem­ber, when they fell 2.8 per­cent.

Still, home con­struc­tion has largely re­cov­ered from the hous­ing bust that be­gan a decade ago. In 2016, builders started work on the most new homes since 2007, the year the Great Re­ces­sion be­gan. Home build­ing in­creased the most last month in the North­east, where hous­ing starts soared 55.4 per­cent, and the South, with a 20 per­cent rise. De­vel­op­ers broke ground on the most new homes in the South in more than nine years.

Higher mort­gage rates could ex­ert a big­ger drag on sales in the com­ing months. The av­er­age fixed-rate 30year mort­gage eased to 4.15 per­cent this week, down slightly from 4.17 per­cent the pre­vi­ous week.

While that is still low his­tor­i­cally, it is far above the av­er­age rate of 3.65 per­cent for all of 2016. Rates have been pushed higher be­cause they have fol­lowed the yield on the 10-year Trea­sury note, which has risen be­cause in­vestors have an­tic­i­pated faster growth and higher in­fla­tion since the elec­tion.

JEFF ROBER­SON — THE AS­SO­CI­ATED PRESS FILE

In this Mon­day file photo, work con­tin­ues on new hous­ing un­der con­struc­tion in St. Louis.

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