WASHINGTON -- Despite the lowest mortgage rates since the early 1970s, the pace at which builders broke ground for new homes slumped 2.8 percent in July, the second straight decline, the Commerce Department reported yesterday.
The skid, combined with downward revisions for both May and June, meant housing was not only no longer pacing the lackluster recovery, as it had until spring, but was also becoming a drag.
It was also another dose of bad economic news for the Bush administration during this week of the Republican National Convention.
"We've got a tug of war going between lower interest rates and the factors causing the lower interest rates," said David Seiders, chief economist for the National Associa
tion of Home Builders. The weak economy and poor consumer confidence, he indicated, seemed to be prevailing.
"A lot of people are telling me they're waiting until after the election to see who is at the helm," said Nancy Gainer, president of Columbia-based Market Specific Sales Training Inc., which works with builders in training salespeople.
Mr. Seiders noted that not even tumbling rates on adjustable mortgages, which are now available at rates just over 5 percent, were providing the stimulus he had expected.
Conventional 30-year mortgages have also become more attractive, averaging 7.96 percent, compared to 9.03 percent as recently as March. This is the first time 30-year rates have moved below 8 percent in almost 20 years.
1% Permits for home construction did
rise 3.7 percent last month, yesterday's report also showed, but analysts found little solace in this. The permits figure has not proved a reliable indicator of future activity, and in any event the July increase for single-family homes was negligible.
The department reported in July that June sales of new #i single-family homes were at an annual rate of 572,000, up 7.9 percent from May.
July's starts, at a seasonally adjusted annual rate, were 1.12 million, down from revised rates of 1.15 million in June and 1.20 million in May. The June decline was revised to 3.8 percent, instead of the 3.2 percent first reported.
This was the first time since January 1991 that housing starts, which have a significant ripple effect throughout the economy, have dropped for two straight months.