WASHINGTON — Housing construction edged down 1.5% in August, the fifth decline in the last six months, as rising mortgage rates continued to dampen demand for new homes, the government reported Thursday.
The Commerce Department said new homes and apartments were built at a seasonally adjusted annual rate of 1.58 million units last month, the slowest construction pace since April, 1983.
The August decline followed a small increase of 1.3% in July. For the first eight months of this year, new home construction has fallen 11.2% below the pace set during the same period in 1986.
Analysts attribute the slump in housing to mortgage interest rates, which have climbed by almost 2 percentage points since late March.
Many economists predict further declines in coming months because of a sharp jump in rates in recent weeks. The national average for fixed-rate mortgages climbed to 10.99% this week, according to a survey released Thursday by the Federal Home Loan Mortgage Corp. It was the fifth consecutive increase and pushed mortgage rates to their highest level since Jan. 17, 1986.
"Interest rates are going up and the housing sector is getting squeezed out in the traditional pattern," said Richard Peach, senior economist for the Mortgage Bankers Assn.
All of the decline in August was concentrated in single-family homes, which fell by 4.5% to 1.10 million units.
"If the weakness in single-family starts continues, and the recent interest rate surge suggests that it will, housing starts will continue down for the rest of the year," predicted John Tuccillo, chief economist of the National Assn. of Realtors.
Tuccillo forecast that mortgage rates will rise by another one-half to a full percentage point by January, pushing fixed rate mortgages close to 12%.
"We don't expect the housing market to collapse because of the latest rate increase, but it will have a negative impact," said Dean Crist, an economist with the National Assn. of Home Builders.
He predicted that new construction for all of 1987 would total 1.63 million units, down from an eight-year high of 1.81 million units in 1986 but still well ahead of the low-point this decade of 1.06 million units during the recession year of 1982.
Multi-unit housing was being built at an annual rate of 484,000 units in August. This was up 6.1% from the July rate but 21.9% below the level of activity a year ago. Apartment construction has been falling all year because of the adverse effects of the new tax law and widespread overbuilding in many parts of the country.
Building permits, considered a good sign of future activity, declined further in August, edging down 0.1% to a seasonally adjusted annual rate of 1.49 million units, the weakest level for building permits since March, 1983.
The declines in housing starts were led by a 12.4% plunge in the Northeast, where homes and apartments were being built at an annual rate of 248,000 units in August.
Starts were down 2.5% in the West to an annual rate of 426,000 units. Starts edged down 0.9% in the South to an annual rate of 634,000 units.
The Midwest was the only region of the country to show a gain in August, compared to July, an increase of 11.4%.