Home building gains 5.6% in '05 despite December fall
WASHINGTON -- Home building cooled in December, but 2005 was a record year nevertheless.
The Commerce Department reported yesterday that construction of single-family homes and apartments totaled 2.065 million units last year. That was an increase of 5.6 percent over 2004 and pushed total construction to the second highest level on record, exceeded only by 2.357 million units built in 1972.
Construction of single-family homes did hit a record high for the third straight year, rising to 1.714 million units, up 6.4 percent from the previous record of 1.611 million single-family homes built in 2004.
That performance came despite the fact that housing activity dropped by 8.9 percent in December, the biggest decline in nine months.
Part of that fall-off was attributed to the weather. Unusually mild weather in November had boosted construction while wet and cold weather in many parts of the country depressed December activity.
However, analysts said they also believed the December decline was reflecting the start of a cooling-off period for construction as builders face rising inventories of unsold homes due to weakening demand.
Sales of new and existing homes have been at record highs in 2005, marking the fifth straight year of record sales. But economists believe those sales will taper off in 2006 and construction will be down as well.
While some analysts have worried that housing has been gripped by the same speculative frenzy that took control of the stock market in the late 1990s, most economists believe the slowdown in housing will have less severe consequences for the overall economy.
''I think the most likely scenario is that housing euphoria slowly deflates but doesn't burst," said Mark Zandi, chief economist at Moody's Economy.com.
Meanwhile, the Labor Department reported that the number of Americans filing claims for unemployment benefits dropped to 271,000 last week, the lowest level since April 2000.
The unexpectedly sharp decline of 36,000 claims from the previous week provided further evidence that the labor market continues to show strength. The four-week moving average for claims, which smoothes out volatility, declined by 12,000 to 299,000 last week.
