Mortgage lenders disagreed on whether December's surprising 7.1% uptick in housing starts signaled a rebound in mortgage activity.

In announcing the December data, which brought housing starts for the year to 1.66 million units - up 3% from 1998 - the Commerce Department pointed to unusually mild weather at yearend, confirming some lenders' view that the surge in construction was an anomaly. "The overall housing trend seems to be down," said Patrick M. Feldman, assistant vice president and portfolio manager at Thornburg Mortgage in Santa Fe, N.M.

But Joe Anderson, executive vice president of consumer markets for Countrywide Credit Industries' home loan unit, said volume at the Calabasas, Calif., company is up significantly. He said the stock market, consumer confidence, low unemployment, and a healthy job market are all fueling home sales despite higher mortgage rates.

Similarly, Dennis R. Cronk, president of the National Association of Realtors, said he was not surprised by December's housing starts, arguing that a strong economy continues to push sales of new and existing homes. He said tremendous consumer confidence exists and argued that consumers' sensitivity to interest rates actually encourages them to pull the trigger on deals rather than wait.

Indeed, the consumer confidence index soared to 141.4 in December, its second-highest reading in the index's 32-year history. The index, based on a survey by the Conference Board, a nonprofit business research organization, hit 142.3 in October 1968.

The latest data from the Mortgage Bankers Association were also upbeat. It reported Wednesday that loan applications rose 18.8% in the week ended Jan. 14. The group said applications, including those for refinancing, were nearly 40% below the year-earlier level but that purchase applications rose 4%.

Mr. Cronk, a 48-year-old realtor in Roanoke, Va., argued that interest rates are not so much of a deterrent as some people believe. "As long as we have single-digit interest rates, buying or building a home will still be affordable," he said.

The 1.66 million starts in 1999 are the most since the 1.80 million in 1986.

Countrywide's Mr. Anderson said innovative products such as higher loan-to-value mortgages and subprime lending are offsetting the effect of rising interest rates, and he predicted a good year for the mortgage industry.

"The rate at which consumers buy homes will continue to surge throughout the year," he said. "We'll see a very healthy housing and mortgage market throughout the 12-month period."

Mr. Cronk said he expects a 4% to 5% decrease in housing starts this year but said that even if interest rates continue to rise, "I feel comfortable homes will remain affordable and we will continue to have a strong market."

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