The housing market is improving, despite a decline in housing starts in June.

Housing starts slipped 0.1% last month, dragged down by multifamily housing. But single-family housing starts rose 4%, the biggest increase in four months, and home sales are strong.

One economist said that though builders still have unsold homes on their hands, the overhang should not hut the home mortgage industry, which is improving.

David Berson, chief economist at the Federal National Mortgage Association, or Fannie Mae, said home sales are up almost 20%, a clear indication that the drop in interest rates since January has improved the market environment.

"Home sales are going up and will continue to go up," Mr. Berson said. But housing starts will continue to lag sales for a few months, because builders with unsold homes on their hands are hesitant to start new ones.

Mr. Berson spoke cautiously of the future for home sales, however. He does not expect large increases in housing for the rest of the year, because the economy and consumer confidence remain weak.

"We will continue to see (mortgage interest) rates below 8% for the rest of the year," Mr. Berson said, even if the Federal Reserve does not further cut short-term interest rates. "Housing will remain awfully affordable."

But though home sales were up last month, they have not been steady, said one lender.

Paul Towers, senior vice president and director of secondary marketing at United Jersey Bank's residential mortgage division, Ridgefield Park, N.J., said housing starts have not been as consistent as he would like to see to feel comfortable

"We're not seeing robust new-home sales on an ongoing basis," Mr. Towers said. He was particularly concerned about the poor outlook for the Northeast, where UJB does most of its business.

Mr. Towers said he is pessimistic not only about purchase business, but also about refinancings, because there are few people left who could refinance at today's rates.

The traditional homebuying months were not much help, Mr. Towers said.

"The spring season was much less than most people had anticipated in this industry, and much less than it should have been," he said. Fewer people are buying more expensive homes now, he said, due to consumers' concern about the future of the economy.


The Mortgage Bankers Association of America said its application survey for the week ended July 14 found that refinancings accounted for 32% of total applications, and 18% were for adjustable-rate loans.

Loan application volume was up 70% from the same week of 1994.

The average interest rate for a 30-year fixed loan rose 24 basis points, to 7.87%, according to HSH Associates, Butler, N.J.

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