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Published: Friday, 1/19/2001

Housing construction still healthy in 2000

ASSOCIATED PRESS

WASHINGTON - After a strong 1999, builders broke ground on fewer new homes, condominiums and apartments in 2000 as a drop in consumer confidence late in the year and higher mortgage rates earlier cut into demand.

Still, housing construction remained at a healthy level even though builders posted their weakest performance since 1997.

The Commerce Department reported yesterday that builders started work on 1.59 million housing units last year, a 4.4 percent drop from the 1999 mark of 1.67 million, the highest since 1986. “Housing starts took a sizable haircut over the course of 2000” but the level of activity was still firm, said Ken Mayland, president of ClearView Economics.

A number of factors affected housing activity in 2000. Higher mortgage rates dampened demand in the first half of the year, economists said. But, they added, cheaper rates in the second half helped to cushion the blow of other forces that can make people feel less inclined to make big purchases: a drop in consumer confidence, higher energy prices, stock market volatility and slower job growth.

After hitting a five-year high of 8.64 percent in May, mortgages rates have fallen, helping to keep housing and construction activity at solid levels even as the overall economy has slowed.

In December, the average rate on a 30-year fixed-rate mortgage was 7.4 percent, down from 7.7 percent in the previous month and from 7.9 percent in December 1999.

This week the 30-year rate averaged 7.02 percent.

While last year's 1.59 million level was the lowest since 1.47 million in 1997, “builders felt pretty good about the state of affairs through the end of 2000,” said David Seiders, chief economist at the National Association of Home Builders.


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