Building Booming
November Permits Keep State On Pace For Busiest Year Since 1989

December 29, 2004
By KENNETH R. GOSSELIN, Courant Staff Writer

November's housing construction in Connecticut was the strongest in 16 years, boosted by lower-than-expected mortgage rates and weather warm enough to sink foundations.

And home building in the state this year remains on a pace to exceed construction in 2003, perhaps by as much as 20 percent.

If permits in December keep pace with the first 11 months of the year, it would mark the busiest year for home builders since 1989.

In November, the state's towns and cities issued building permits for 1,297 single-family homes, apartment units and condominiums. That was nearly 70 percent more than the 766 units that were approved for permits in the same month a year ago, according to the state Department of Economic and Community Development.

Economists said the strong showing in November might mean less construction in the first three months of 2005. But most still expect new-home construction to remain healthy next year, though not increasing at 2004 levels.

What happens in the state's housing industry - construction, sales and price appreciation - has been well watched since the last recession. It has been an economic bright spot in a state where job growth has lagged behind not only most of New England, but also the rest of the nation.

"I'd hate to think what the Connecticut economy would be without it," said Donald L. Klepper-Smith, an economist at DataCore Partners in New Haven.

Through November, 10,956 building permits were authorized, an increase of 19.7 percent from the first 11 months of 2003, when 9,156 permits were issued.

Hartford County, where housing construction has lagged behind most of the state's eight counties, might now match the levels of 2003, thanks to stronger-than-expected permit volume in November.

Builders broke ground on 291 units in Hartford County - including 99 in South Windsor - in November, more than double the 140 in November of 2003.

So far this year, Fairfield County is the home building hot spot, with a 43.5 percent increase, compared with the first 11 months of last year. After a slow start, New Haven County is second, rising 31.6 percent, followed closely by New London County, with a 29.7 percent gain.

Only Tolland County is showing a decline, down 4.3 percent.

One driver behind the larger-than-expected increase in November was lower-than-expected borrowing rates.

The popular 30-year, fixed-rate mortgage has averaged well below 6 percent for most of this year, far lower than many economists had expected. But more talk of rising rates this fall may have spurred consumers to sign contracts to build new homes.

"The Federal Reserve has clearly signaled that increases in rates are coming, and home buyers are rushing to build while mortgage rates are still favorable," said Mark Prisloe, associate economist at the state economic development department.

In addition, developers of apartment complexes and age-restricted communities also may have been prompted to build now, Prisloe said.

Although the Fed's actions on short-term rates don't directly affect mortgage rates, they do ripple into the bond market. And mortgage rates closely track the 10-year Treasury note.

Economists studying housing permit data consider that some towns and cities showing unusually large spikes in permits may be authorizing apartment complexes. For each unit of rental housing, a separate permit is issued.

That was the case in Meriden, the municipality with the largest number of permits in November. Of 186 units authorized, 160 were in a large apartment complex.

But that wasn't what happened in Stamford, which had the second-highest number of permits. The city issued permits for 115 units, a mix of single-family homes and condominiums.

Permits are issued just before builders break ground. They differ from projects approved by local planning and zoning agencies that may or may not be built.