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Housing holds steady: multifamily leads the starts increase, and first-timers (with a boost from low interest rates) fuel demand.

The pace of economic growth faltered in late 1995. Weakness carried into the beginning of 1996, when the government shutdown and bad weather added to the problem.

Home building held up fairly well. Lower mortgage rates apparently offset the slowdown in employment growth, high consumer debt levels, and weak consumer confidence.

The picture of the economy and of home building is hazy, however, because the government didn't release the usual economic statistics. November 1995 housing starts estimates weren't released until January, a month behind schedule.

Single-family is flat. Those November figures showed total starts up 6 percent from October to a rate of 1.420 million, all due to a rebound in multifamily starts. Single-family starts were unchanged at 1.102 million.

NAHB's monthly builder survey showed essentially no change, after a drop in early November. The housing market index was at 51 in January - an insignificant change from 52 in December, but high compared with 38 a year earlier. So even with the slowdown from the strong third quarter of 1995, the first half of 1996 will likely be better than early 1995.

The survey revealed greater enthusiasm about current and prospective sales of townhouses. Respondents consistently are more favorable about the market for detached homes than the market for townhouses, and that's still true, but the number saying there's a good market for townhouses was much higher in the latest survey than it was a year earlier. And townhouses' share of starts increased in 1995, although they're still less than 10 percent of the single-family total.

First-timers in the driver's seat. Stronger town-house demand may come from first-time buyers taking advantage of low mortgage rates. The homeownership rate increased to 65.0 percent in the third quarter of 1995 from 64.1 percent a year earlier. That may not seem like a big change, but the rate had been stuck at about 64 percent since the mid-1980s, and a change of 0.9 percent means almost a million households (net) shifted from renting to owning.

More evidence of strong first-time buyer demand for new homes: a decline in the median size of new homes. That number had been increasing for many years, except during recessions, but the 1994 median of 1,940 square feet was not larger than in 1993, and partial data suggest the median for 1995 was even less.

Most new homes are sold to trade-up buyers, but with low mortgage rates, strong existing-home sales, and an aging population, trade-up demand should become an even greater share of the new-home market. Perhaps someone forgot to tell that to the middle-aged baby-boomers who seem to be holding back.

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Title Annotation:home building industry's 1995 statistics
Date:Feb 1, 1996
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