Fewer New Households Raises Flag

Economy

American home buyers, encouraged by low mortgage rates and rising incomes, made 1996 a banner year for builders. Trouble is, people don’t buy new houses every year and the number of potential home buyers isn’t growing as it was.

Builders and real estate brokers say that means, while 1997 could be a good year for business, it won’t match last year.

People have been buying first homes or trading up to fancier ones in rising numbers over the last four years. Last year, U.S. home ownership hit a 16-year high of 65.4 percent of households, said Eileen Neely, senior economist at Fannie Mae.

Still, household formation is slowing. The Census Bureau estimates that roughly 1.077 million new households will be created in 1997. That’s 31,000 fewer than in 1996 and therefore fewer families hunting for new or used houses.

What’s more, interest rates are on the rise. Higher rates could persuade home buyers to wait.