May 17, 2002 By Jeannine Aversa Associated Press Writer 3 min read

WASHINGTON (AP) – Housing construction – which started off the year with a bang – declined in April for the second month in a row, a sign the building sector may be losing some steam. Builders broke ground last month on 1.56 million units, at a seasonally adjusted annual rate, a 5.4 percent decline from the March level, the Commerce Department reported Thursday.

In March, housing construction declined by 8.1 percent, according to revised figures. That was an even bigger drop than the government previously reported.

Stock prices edged up Thursday. The Dow Jones industrial average gained 32 points in the first hour of trading and the Nasdaq index added 1 point.

Mild weather early in the year helped to power housing construction, which remained solid throughout last year’s recession. Analysts have been predicting a slowdown in the sector, saying that robust levels of activity seen through much of last year and the beginning of this year couldn’t be sustained.

Unclear about the strength of the economic recovery, the Federal Reserve last week left short-term interest rates unchanged at 40-year lows. Economists are hopeful that low borrowing costs will motivate consumers to keep on spending and businesses to step up investment, which would aid the recovery.

One of the Fed’s concerns is how consumers – who kept buying big-ticket items such as homes and cars throughout the slump – would hold up coming out of it.

Fed Chairman Alan Greenspan has projected that consumers, whose spending accounts for two-thirds of all economic activity in the United States, probably would have less pent-up demand, making for a less than sizzling recovery.

Another factor that could affect consumer behavior is the nation’s jobs market.

In another report, more Americans filed new claims for unemployment insurance last week, the Labor Department said. New claims rose by 2,000 to 418,000.

In the housing report, construction of single-family homes dipped by 2 percent in April to a rate of 1.27 million units. That followed a steep 12 percent decline the month before. Work on multifamily housing, including apartments and condos, fell 11.5 percent last month to a rate of 261,000. That compared with a 8.1 percent rise in March. By region, housing starts plunged by 24.1 percent in the Northeast to a rate of 126,000.

In the Midwest, they plummeted 19.5 percent to a rate of 276,000. In the West, housing construction fell 5.8 percent to a rate of 377,000. But in the South, starts rose 5.6 percent to a rate of 776,000.

Even with the slowdown in home construction, analysts predict the sector will continue to be healthy.

Relatively low mortgage rates and solid housing appreciation make purchasing a home an attractive investment.

Mortgage rates have been hovering below the 7 percent mark, providing prospective home buyers with good financing conditions. Last week, the average rate on a 30-year fixed-rate mortgage averaged 6.79 percent, according to Freddie Mac, the mortgage company.

Against this backdrop “builders have every reason for continued optimism about their sales prospects,” said Gary Garczynski, president of the National Association of Home Builders.