Falling interest rates, rising home prices, and strong underlying demand continue to fuel the housing sector amid broad economic weakness, as housing starts rose 2.8 percent in July from the previous month to a seasonally adjusted annual rate of 1.67 million, the Commerce Department reported today.

"Housing has remained a strong point in the economy even as signs of weakness persist elsewhere. This is primarily due to falling mortgage interest rates, which now have slipped below 7 percent; rising home prices, which have brought the investment aspect of housing to the forefront as the stock market has continued to falter; and firm underlying demand fueled by stronger than anticipated household growth as evidenced by new Census figures," said Bruce Smith, president of the National Association of Home Builders (NAHB) and a home builder from Walnut Creek, Calif.

Single-family starts rose 1.5 percent to a seasonally adjusted annual rate of 1.3 million, and multifamily starts posted a 7.6 percent gain to stand at 368,000 units.

Recent builder surveys indicate that the housing outlook remains strong in the weeks and months ahead, but Smith cautioned that due to the overall economic weakness, several potential roadblocks loom ahead.

Regionally, starts of new homes gained 21.3 percent in the Northeast, 3.8 percent in the South and 2.3 percent in the West. The exception was the Midwest, where starts declined 6.8 percent. The beleaguered manufacturing sector is still concentrated in the Midwest region. Building permits, which can be an indicator of future building activity, declined 1.8 percent overall. Single-family permits were down 1.9 percent while the multifamily side remained flat.

Published: August 16, 2001

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