Decline Seen in New Home Construction

WASHINGTON D.C. ?EUR??,,????'??+ Construction of new homes slipped for a second straight month in August, according to a report released Tuesday by the Commerce Department.

The report notes that construction of new homes and apartments dropped 1.3 percent last month after a decline of 1.5 percent in July. Even with the declines, housing construction totaled 2.01 million units in August, the eighth month out of the past nine that housing has been above the 2-million mark.

“We see a flattening of housing starts and the beginning of a cooling process,” said David Seiders, chief economist at the National Association of Home Builders.

Seiders predicted that for all of 2005 housing construction would total 2.02 million units, up 3.6 percent from last year’s pace and the best showing in more than two decades.

But for 2006, Seiders forecast housing construction would drop by 4.8 percent to around 1.92 million starts. Seiders added just 25,000 new starts to that figure to represent rebuilding from Katrina, expecting that this effort will be stretched out perhaps as long as five years.

Ken Simonson, chief economist for the Associated General Contractors of America, forecast that the price of building materials such as lumber and cement will rise by 10 percent or more next year, reflecting demand pressures related to Katrina. That is up from a 6 percent to 8 percent increase in the cost of building supplies before Katrina hit.

According to the report, Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 2.124 million. This is 2.2 percent below the revised July rate of 2.171 million, but 3.2 percent above the August 2004 estimate of 2.058 million. Single-family authorizations in August were at a rate of 1.668 million, 1.3 percent below the July figure of 1.690 million. Authorizations of units in buildings with five units or more were at a rate of 366,000 in August.

Privately-owned housing starts in August were at a seasonally adjusted annual rate of 2.009 million, 1.3 percent below the revised July estimate of 2.035 million, and 0.8 percent below the August 2004 rate of 2.025 million. Single-family housing starts in August 2005 were at a rate of 1.709 million, 0.1 percent above the July figure of 1.707 million. The August rate for units in buildings with five units or more was 256,000.

The Commerce Department report shows that privately-owned housing completions in August were at a seasonally adjusted annual rate of 1.860 million, 0.2 percent below the revised July estimate of 1.863 million, and 2.6 percent below the August 2004 rate of 1.909 million. Single-family housing completions in August 2005 were at a rate of 1.551 million. This is a 4.7 percent drop from the July figure of 1.627 million. The August rate for units in buildings of five units or more was 261,000.

By area of the country, construction rose by 13.3 percent in the West to an annual rate of 561,000 units. All other areas of the country posted declines in August from the level of activity in July.

The area of the country with the biggest drop in activity was the South, where construction fell by 6.6 percent to an annual rate of 915,000 units.

Construction was down 5.2 percent in the Midwest to an annual rate of 346,000 units and down 4.1 percent in the Northeast to an annual rate of 187,000 units.