WASHINGTON — Cheap mortgages and plentiful jobs fueled a national surge in home building during July, the government said Wednesday, pushing construction activity to a pace not seen since the boom years of the 1980s.
The Commerce Department said building starts on new homes and apartments jumped 5.7% last month to a seasonally adjusted annual rate of 1.72 million units after a revised matching 5.7% increase in June to 1.63 million units.
July registered the strongest building activity in more than 11 years--since March 1987, when new homes were being built at an annual rate of 1.73 million.
Builders scrambled to hire carpenters to keep up with demand, some of it sparked by a flood of overseas investment capital from frightened Asian economies that has meant ever-lower mortgage interest rates for Americans.
Rates for long-term home loans have stayed below 7% since mid-June, according to mortgage company Freddie Mac, which said a 30-year mortgage was available last week at an average of 6.91%.
"One could hardly imagine a better environment for new-home construction," said economist Ken Mayland of KeyCorp in Cleveland. "[There are] low mortgage rates, a strong labor market which inspires confidence, a huge buildup of stock market wealth and a depleted inventory of new homes."
Not only were building starts up in July, but new applications for building permits increased 4% to an annual rate of 1.58 million, signaling continued stimulus for U.S. economic activity from the housing sector.
Every part of the country experienced robust home building activity in July. Starts rose 4.3% to an annual rate of 436,000 in the West. They were up 11.8% in the Northeast, 6.8% in the South and 1.9% in the Midwest.
David Seiders, an economist with the National Assn. of Home Builders, said he expected "a modest slowdown" in the final quarter this year. But at the moment, builders are hard-pressed to keep up with demand, according to a survey of 400 member companies in June.
Construction starts last month were 17.6% higher than in July 1997, when building was running at rate of 1.46 million new homes a year.
The building rate for single-family homes climbed 3% to 1.31 million units a year--the highest since a matching rate in March 1994.
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Seasonally adjusted annual rate, millions of units:
July: 1.72 million
Source: Commerce Department