June Housing Starts Rose 1.3% Despite Higher Mortgage Rates
March 29, 2011
WASHINGTON -- Housing starts rose 1.3% in June as builders rushed to meet consumer demand despite the highest mortgage rates in more than a year. Single-family construction hit a two-year high. Regionally, activity was mixed with starts increasing in the South and West and declining in the Northeast and Midwest. The Commerce Department said today construction of new homes and apartments totaled 1.48 million at a seasonally adjusted annual rate, up from a revised 1.46 million in May. The May total initially was estimated at 1.43 million. Analysts had expected construction to edge up to just a 1.45 million rate in June. The full text of the Commerce Department's report on housing starts is available. Starts have bounced up and down in recent months as builders attempted to gauge the market in the face of rising financing costs. They had risen 5% in April, to a 1.51 million rate. According to the Federal Home Loan Mortgage Corp., 30-year, fixed-rate mortgages averaged 8.32% in June, up from 8.09% in May and matching the average in April 2010. Rates had dropped to 7.03% last January and the subsequent run-up has added appreciably to the cost of buying a home. For instance, the monthly payment on a $100,000 mortgage with a 7% interest rate is $665, while the payment on the same loan with an 8% rate is $734 -- a difference of $69. Still, demand has remained strong, with new home sales in May hitting a 10-year high. And despite the monthly volatility, starts during the first six months of the year were 13.5% above those of the same period of 2010. A survey by the National Association of Home Builders, however, suggests the market may be leveling off. The association's Housing Market Index slipped in July to 60, one point lower than in June and the third straight decline. ``The gradual decline occurs as pent-up demand from the unusually severe winter months runs its course and home buyers begin to slow the pace of purchases as a result of rising interest rates,'' the association said. In fact, applications for building permits, a gauge of builder confidence and future activity, slipped 2.5% in June to a 1.42 million rate. It was the second straight decline.
