Newspaper article The Florida Times Union

New Housing Moderates; 'Soft Landing' on Target, Say Economists

Newspaper article The Florida Times Union

New Housing Moderates; 'Soft Landing' on Target, Say Economists

Article excerpt

WASHINGTON -- Housing construction moderated last month as builders broke ground on more apartments than single-family homes, the latest evidence that the nation's economy is slowing to a more sustainable pace.

Housing starts inched up to a seasonally adjusted annual rate of 1.53 million in October, a 0.1 percent increase from September, the Commerce Department said yesterday.

Even with the small advance, new housing construction, which declined each month from May through August, remained at a solid level, analysts said.

"It's not the fantastic market we saw one year or 1 1/2 years ago," said Stanley Duobinis, director for forecasting at the National Association of Home Builders.

"Traffic is a little reduced, sales are not coming as quickly and as easily, and builders are telling us the marketplace is cooling," he said. "But nobody is telling us the market is really dropping like a rock."

The latest housing report was weaker than many analysts anticipated. They had expected that September's strong 0.7 percent increase would be matched in October.

Still, "not too many builders will be crying too loudly ... they are still digging those holes," said economist Joel Naroff of Naroff Economic Advisors. "For the first 10 months of this year, housing starts are down about 3.5 percent, not a really large number given that we did set a record last year."

The Federal Reserve has boosted short-term interest rates six times since June 1999 to slow the economy's growth enough to keep inflation in check, but not so much that it triggers a recession. The Fed's rate increases are designed to raise borrowing costs and dampen demand for big-ticket items such as homes and cars. Many call this an attempt to reach a "soft landing" for the high-flying economy.

"This report is as 'soft landing' a reading as one could hope for," said First Union's chief economist, David Orr.

The Fed decided Wednesday not to raise rates a seventh time, citing more evidence of moderating economic growth. …

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