21 January 2003, 13:20  U.S. Dec. Housing Starts Seen at 1.68 Million

Washington, Jan. 21 (Bloomberg) -- U.S. housing starts in December stayed above the average pace of the last three years, showing that the industry retained strength at the end of 2002, economists said they expect the government to report today. The lowest mortgage rates in four decades probably helped housing starts run at an annual rate of 1.68 million last month, based on the median of 47 forecasts in a Bloomberg News survey. That would be down from November's 1.697 million-unit pace. The average monthly rate has been 1.6 million since the end of 1999. Home construction probably totaled 1.66 million units in 2002, the most since 1986, when tax incentives fueled a boom in multifamily building, according to statistics compiled by Bloomberg News. An uneven pace of economic growth led Federal Reserve policy makers to reduce interest rates, pushing down mortgage rates, spurring construction and bolstering the economy.
``Low mortgage rates helped offset the fact that there was weakness in the economy and employment,'' said Michael Carliner, an economist at the National Association of Home Builders in Washington. ``We're probably going to have a modest slowdown in 2003, and that's because since demand has been so strong, we don't have a lot of people who delayed buying.'' The Commerce Department is to release the report at 8:30 a.m. Washington time. Housing accounts for more than half of all U.S. construction and boosts the economy by stimulating spending on building materials, home appliances and home furnishings.
Mortgage Rates
An elevated pace of housing starts is expected because new home sales are at record highs and mortgage rates are staying close to all-time lows. Sales of new single-family homes reached a record 1.069 million annual rate in November, a record fourth straight month above 1 million, Commerce Department figures showed. The average rate on a 30-year fixed mortgage dropped to 5.85 percent in the week ended Jan. 3, according to Freddie Mac, the No. 2 buyer of mortgages. Freddie Mac said the rate was the lowest since the early 1960s. Homebuilders such as M.D.C. Holdings Inc. and Toll Brothers Inc. said demand for houses has been strong. M.D.C. Holdings, the ninth-biggest U.S. homebuilder, said it had orders for 9,377 houses through November last year, up 29 percent from the year- earlier period. Toll Brothers, the largest U.S. builder of luxury homes, and said orders for new houses rose 34 percent in the quarter ended Oct. 31. //www.quote.bloomberg.com

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