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Housing Construction Drops in February
By JEANNINE AVERSA, Associated Press Writer
WASHINGTON - The number of housing projects commenced by
builders declined for the second straight month in February as bad
weather in some parts of the country forced construction delays.
The Commerce Department (news - web sites) reported Tuesday that
the number of residential buildings under way fell to a seasonally
adjusted annual rate of 1.86 million units in February, representing
a 4 percent decrease from the previous month.
Although economists were forecasting a rise in residential construction
in February, the level of housing projects in January turned out
to be higher — a rate of 1.93 million units started —
than first thought, according to revised figures. That made for
a smaller decline in activity than reported a month ago.
Even with the declines, both January and February's levels of activity
were still considered healthy, economists said.
In fact, the number of residential projects under way in February
still marked a sizable 13.1 percent increase from the same month
a year ago.
On Wall Street, stocks rose. The Dow Jones industrials were up 76
points and the Nasdaq gained 16 points in morning trading.
The Federal Reserve (news - web sites) decided to hold a key short-term
interest rate at a 45-year low, it was announced Tuesday. Fed Chairman
Alan Greenspan (news - web sites) and his colleagues left the federal
funds rate unchanged at 1 percent, where it has been since June.
The funds rate is the interest that banks charge each other on overnight
loans and is the Fed's primary tool for influencing economic activity.
Home sales reached record high levels in 2003, powered by low mortgage
rates. Economists believe 2004 also will turn out to be a good year
for home sales.
The average rate on benchmark 30-year mortgages last week dropped
to 5.41 percent, the lowest level in eight months. The decline moved
rates on 30-year mortgage closer to a record low of 5.21 percent
reached in the middle of June.
"The housing market is getting a second wind from lower mortgage
rates and will remain strong throughout 2004," predicted Robert
McGee, chief economist at U.S. Trust.
Home builders feel good about market conditions, although they are
slightly less bullish about sales for March as well as sales over
the next six months, according to a monthly survey by the National
Association of Home Builders.
"The tremendous pace of home sales in last year's final months
has apparently given way to a more sustainable level of activity
in early 2004. This climate of stability is a positive sign heading
into the spring home buying season," said Bobby Rayburn, the
association's president and a home builder from Jackson, Miss.
Tuesday's report showed that residential construction rose in the
Northeast and the Midwest in February, but fell in the South and
the West.
"It was unusually wet and cold in the South and the West,"
said David Seiders, chief economist at the National Association
of Home Builders. "So we were prepared to see some erosion
in starts in those two regions."
Housing starts in the Northeast increased by a whopping 25.3 percent
in February from the previous month to a seasonally adjusted annual
rate of 188,000. In the Midwest, residential projects increased
by 7.1 percent to a pace of 349,000. But in the South, housing starts
dropped by 10.6 percent to a rate of 839,000 and in the West, residential
construction fell by 7.5 percent to a pace of 479,000.
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