8% Drop in Home Building Permits Seen for '95
Kulkosky, Edward, American Banker
The drop in mortgage rates won't be doing much for the building industry this year, according to U.S. Housing Markets, a research publication from Lomas Mortgage USA, Dallas.
As a result, Lomas is expecting a decline of about 8% as measured by the volume of building permits issued.
A decline in new-home construction not only reduces the demand for mortgages directly but also breaks the chain of home sales and financings. "This year's environment of lower interest rates contrasts favorably with the rising trend we witnessed last year," said Robert R. Denton, executive vice president of Lomas Financial Group.
"Traditionally, this would give housing a strong lift. But this year, weaker single-family demand and rising consumer fears about local job prospects and economic conditions will keep the lid on new-home sales." Mr. Denton said he expected home building to undergo the most pronounced cutbacks in the Midwest and on the West Coast, partly because of unusually wet weather that delayed construction.
He added that aerospace and military cutbacks were still having an impact on employment on the Coast, and that weakness was also beginning to show in the Midwest, with its concentration of long- established manufacturing companies.
Lomas expects Florida to remain the busiest state, but expects building permits there to decline by about 11%. Georgia, gearing up for the 1996 Olympics, is the only state expected to show a gain - a skimpy 1.8%. Surveying key areas in the rest of the country, Mr. Denton had these comments: