Housing construction soars
By Jeannine Aversa
Associated Press
WASHINGTON — Housing construction, bolstered by low interest rates and good weather, climbed in February to its highest level in more than three years.
Home builders broke ground in February on 1.77 million housing units, at a seasonally adjusted annual rate, which was 2.8 percent more than in January, the Commerce Department reported yesterday.
"The Energizer Bunny of the economy, the housing market, keeps on going and going and going," said economist Joel Naroff of Naroff Economic Advisors.
February's larger-than-expected increase pushed housing construction to its highest level since December 1998 and followed a strong 7.4 percent advance in January, even bigger than the government previously reported.
All of the strength last month came from single-family home construction, which rose 7.4 percent to a rate of 1.46 million in February, the highest level in more than 23 years.
The number of apartments, condos and other multifamily housing fell by 12 percent to a rate of 264,000. Economists believe that drop reflected in part weaker demand for rental housing as low mortgage rates and solid appreciation in home values have made buying a home attractive.
"Builders are still seeing home buyers really excited about the investment aspects of home ownership and about good financing conditions," said David Seiders, chief economist for the National Association of Home Builders.
A survey by the association showed that the nation's home builders are more optimistic about sales prospects for March as well as for the next six months.
"Low interest rates, resilient home values and a stabilizing economy have helped home buyers put whatever fears they might have had following Sept. 11 behind them, which in turn has produced renewed builder optimism," said National Association of Home Builders President Gary Garczynski, a builder and developer from Woodbridge, Va.
The Federal Reserve's 11 interest rate cuts last year resulted in commercial banks lowering their prime lending rate — a benchmark for many consumer and business loans — to 4.75 percent, a level not seen since November 1965.
Fed Chairman Alan Greenspan and his colleagues decided on Tuesday to continue holding short-term interest rates steady. But they also expressed more optimism that the country is bouncing back nicely from the recession that began last March. That prompted many economists to predict the Fed will begin to raise rates as early as May or June.
With the recovery gaining steam, analysts predict that longer-term mortgage rates will rise, but remain at a level that would make buying a home affordable for many prospective buyers.
The average interest rate on a 30-year fixed-rate mortgage rose to 7.08 percent last week. Some economists believe 30-year rates will hit a high of 7.5 percent by the end of this year.
Economists said the brisk activity in new housing construction in both January and February, will be a factor contributing to economic growth in the first quarter of this year. Some economists believe the economy, which grew 1.4 percent in the fourth quarter of 2001, could expand at a sizzling rate of 5 percent or more in the current quarter.
By region, housing construction rose 14 percent in the West, 0.9 percent in the South and 0.8 percent in the Midwest. But in the Northeast, housing construction fell by 9.3 percent.
Economists say that consumers' spirits are being lifted with increasing evidence that the economy is rebounding from a recession. The manufacturing sector, which had been hardest hit by the slump, appears to be mounting a comeback. Also, for the first time in seven months, businesses added jobs in February, helping to push the nation's unemployment rate down to 5.5 percent.
