WASHINGTON — Despite dry weather, housing construction only partially rebounded in June from the sharp slump in May, and economists say rising mortgage rates likely will curtail home building for the rest of the year.
The Commerce Department said Tuesday that builders started construction of new houses and apartments at a seasonally adjusted annual rate of 1.45 million units in June, up 5.1% from the previous month.
But the improvement only partly offset a precipitous 12.6% decline in May.
"The June numbers are just a technical correction. They don't really signal a rebound in housing," said Thomas M. Holloway, senior economist of the Mortgage Bankers Assn. of America.
The hot, dry weather of June, bad for farming but ideal for home building, also contributed to the uptick.
Potential Buyers Wary
And, mortgage interest rates, which had climbed by three-quarters of a percentage point from post-stock crash lows in early March, eased slightly in June, falling by nearly a quarter of a percentage point.
However, interest rates began edging up again in July and most analysts expect the slump in housing, one of the weakest sectors of a growing overall economy, to continue through 1988.
"As the rates have bottomed out and come back up in the wake of the stock market crash, people are asking 'Can I afford a new home?' and more and more of them are saying 'No,' " said Martin Regalia, chief economist of the National Council of Savings Institutions.
David Seiders, chief economist of the National Assn. of Home Builders, said the rate on 30-year, fixed-rate mortgages over the next six months would likely increase between a half and a full percentage point over the current rate of about 10.5%.
A full percentage point rise in a $100,000 mortgage raises a homeowner's monthly payment by about $75.
In recent years, adjustable-rate mortgages, which cost less but can fluctuate, have served as an alternative when long-term rates rise. But Federal Reserve Chairman Alan Greenspan warned last week that the Fed was ready to drive up short-term rates if necessary to control inflation.
"That's going to take away some of the buffering effect of adjustable mortgages," said James Christian, chief economist of the U.S. League of Savings Institutions.
Multifamily Building Drops
Thus, Seiders said he expected units to be started at a seasonally adjusted annual rate of 1.42 million units in the last half of 1988, down from a rate of 1.48 million in the first six months of this year. There were 1.62 million starts in 1987 and 1.81 million in 1986.
All of the housing strength in June came in a rebound in the construction of single-family homes, which jumped 10.2% to a rate of 1.1 million units after falling 6.7% in April and 8.9% in May to the lowest level since August, 1984.
That was partly offset by a continued decline in apartment construction to 356,000 units, an 8.2% drop and the lowest level since June, 1982, at the depth of the last recession.