Midwest Floods Dampen Housing Starts
WASHINGTON — UNITED STATES housing starts fell 2.7 percent in July as flooding in the Midwest helped dampen the pace of new home building, the Commerce Department said Aug. 17.
The annual rate of starts on new homes declined to a seasonally adjusted annual rate of 1.21 million units last month and compared with a revised fall of 0.2 percent in June. The June rate was initially reported as flat.
Private economists had expected July construction starts for detached homes and townhouses to show a more vigorous rate of 1.25 million a year.
In the Midwest, where flooding along the Mississippi River has devastated wide areas, July housing starts fell 4 percent to a seasonally adjusted annual rate of 265,000. That followed a 2.5 percent decline in June.
But the biggest drop was in the West, where starts plunged 11.9 percent to a rate of 273,000.
President Clinton visited California last week to pledge help for the state's sluggish economy as the government prepares to close military bases there.
Despite July's overall fall in construction activity, underlying conditions for homebuilding remain strong, analysts say. Low interest rates are making homes more affordable while the supply of single-family units is down to about a seven-year low.
Mortgage rates inched down to 7.2 percent in July, their lowest level in over 20 years. In June, rates for 30-year fixed mortgages averaged 7.36 percent.
New construction is a big generator of jobs. Strong home sales generate demand for big-ticket consumer goods such as home furnishings and appliances.