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Housing starts surge
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November 19, 1998: 9:04 a.m. ET
New home building in October grew at fastest pace in more than a year
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NEW YORK (CNNfn) - Housing construction activity grew at its fastest pace in more than a year last month, as the economy - and homebuyers - reaped the rewards of lower interest rates, the Commerce Department reported Thursday.
New housing construction surged 7.3 percent percent to a seasonally adjusted annual rate of almost 1.7 million units, reversing two months of declines.
Construction of new homes and apartments slipped 2.6 percent in September, and 4.9 percent in August.
Economists predicted the annual rate of housing starts in October to be 1.6 million.
Construction activity last month reflects the strongest growth since September last year, when it rose 8.5 percent.
At the same time, applications for new building permits unexpectedly jumped 9.9 percent to a rate of 1.697 million units, suggesting the torrid pace of home building will continue into the new year.
The bond market, balancing the positive news in housing starts with unexpectedly high weekly jobless claims, rose slightly early Thursday.
The 30-year benchmark Treasury bond was up 3/32 for a yield of 5.25 percent.
Gary Thayer, senior economist for A.G. Edwards, said low mortgage rates and continued job security are the key factors contributing to the sector's growth.
"People are out taking advantage of that situation," he said. "We have seen some layoffs, but generally the level of employment is still very high and personal finances are still in good shape, and I think that's what's driving the housing market."
Thayer added the sector's growth should continue into the coming months, and said the economy as a whole is expected to maintain a more "subdued but sustainable" growth rate.
Starts on single-family homes rose 3 percent to an annual rate of 1.286 million in October, following a 1 percent drop in September. Apartment starts surged nearly 24 percent to an annual rate of 409,000 following an 8.1 percent downturn the month before.
Regionally, construction activity was the strongest in the Northeast, climbing 16.5 percent to an annual rate of 162,000. In the South, starts increased 14.5 percent to 820,000 a year and in the Midwest they were up 10.7 percent to 352,000. The only region where starts softened last month was in the West, where they dropped 11.1 percent to 361,000.
Rates for 30-year mortgage loans averaged a relatively low 6.72 percent last month, little changed from September. Stock market prices, after a summer swoon, began to recover during October, which analysts said bolstered consumer optimism about the future. 
--from staff and wire reports
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