Housing construction plunged by 6.9 percent in August
Thursday, September 20th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ New housing construction plunged in August by the largest amount in 17 months as the slumping economy made builders and prospective home buyers more cautious.
The number of new housing units fell by 6.9 percent last month to a seasonally adjusted annual rate of 1.53 million, the Commerce Department reported Thursday. The drop was the steepest since March 2000 and left housing starts at their lowest level in 10 months.
In July, housing construction rose by 0.4 percent, according to revised figures. But that was much weaker than the 2.8 percent jump the government had previously reported.
Housing activity, helped out by low interest rates, has been a pillar helping to support the nation's ailing economy.
But the Sept. 11 attacks on the World Trade Center and the Pentagon could change that. Builders say that are monitoring the situation closely to get a better idea of the attacks' impact on consumer confidence, employment and demand for homes.
The attacks intensified fears that the economy, which was already in bad shape before the strikes, could tip into recession if consumers and businesses sharply cut spending. Consumer spending accounts for two-thirds of all economic activity and has been a main force keeping the country out of recession.
Even before the attacks, builders, in a survey released Wednesday, said they were less optimistic about sales for September as well as in the next six months.
Economists say that people may feel less inclined to make big-ticket purchases, such as homes, given rising unemployment.
The nation's jobless rate shot up to 4.9 percent in August, the biggest one-month jump in more than six years, as the ailing economy continued to hammer the labor market.
Separately, another report Thursday suggested that some workers are still having trouble holding onto their jobs.
The number of Americans filing new claims for state unemployment insurance fell by 49,000 to 387,000 for the workweek ending Sept. 15, the Labor Department said. The latest report doesn't capture the impact of last week's attacks because it normally takes time for people to file jobless claim applications after disasters, economists say.
In an effort to jump-start the economy, the Federal Reserve on Monday cut interest rates for an eighth time this year, pushing borrowing costs to a nine-year low. Economists believe the Fed will continue to cut rates until the cheaper money does the trick of restoring confidence in a rebound.
In August, single-family home construction fell by 2.4 percent to a rate of 1.25 million, following a 1.1 percent decline the month before. Construction of condos, apartments and other multifamily housing plummeted by nearly 23 percent in August.
By region, housing starts fell by nearly 14 percent in the South to a seasonally adjusted annual rate of 666,000. In the Northeast, they declined by 7.7 percent to a rate 155,000 and in the West, housing construction dipped by 3.7 percent to a rate of 367,000. But in the Midwest, construction rose by 6.6 percent to a rate of 339,000.
Low interest rates have helped to keep housing activity stable despite the economic slowdown, which started in the second half of last year. In August, the average rate on a 30-year fixed-rate mortgage was 6.95 percent, down from 8.02 percent for the same month a year ago.