Housing Construction Strongest Since '86
Associated Press - 2/19/2003
WASHINGTON - Powered by the lowest mortgage rates in four
decades, new
home
construction in January hit the highest level since 1986,
the
government
reported Wednesday. The Commerce Department said work was
started on 1.85 million new
single-family
homes and apartment units at a seasonally adjusted annual
rate
last month. That was a 0.2 percent increase from December,
when
housing
construction shot up 4.9 percent from the month before.
Construction in the single-family sector rose a solid 2.1
percent to an
annual
rate of 1.51 million units, the fastest pace in more than
two
decades.
Construction of apartments actually fell by 8.7 percent to
an
annual
rate of 303,000 units. The overall rate of 1.85 million
units was the best showing since May 1986. Sales of both new
and existing homes set records last year as buyers
seized
upon mortgage rates not so low since the early 1960s. In
addition,
home prices have risen as the stock market has declined,
making
homeownership look like a better investment. "With sales at
or near record levels and prices still rising, you would
expect
that new construction activity would be robust and it is,"
said Joel Naroff, chief economist at Naroff Economic
Advisors. David Seiders, chief economist for the National
Association of Home Builders, said there may be some setback
in the February construction
activity
because of the recent severe snowstorm in the Northeast. He
also said growing worries about a possible war in Iraq may
make
people
cautious about committing to a big-ticket purchase such as a
home.
But he said this slowdown will be temporary and be offset by
continued
low interest rates. Seiders forecast that construction
activity this year likely will fall
slightly
to 1.65 million units, down 3.2 percent from last year's
1.71
million
units, the best showing since 1986. "Assuming we get past
Iraq by the middle of the year, we are looking for
home
building to be close to as good as last year," Seiders said.
"The
single-family
housing market has been moving along quite strongly given
that
we had a recession in 2001 and a staggering recovery since
then." Seiders said apartment construction will be effected
by rising vacancy
rates
as more renters take advantage of attractive mortgage rates
to
become
homeowners. He said he believed interest rates would start
to rise in the second
half
of the year, though gradually. Freddie Mac, the mortgage
company, reported that the nationwide average
for
30-year mortgages stood at 5.86 percent last week, just
higher than
the
40-year low of 5.85 percent set in the first week of
January. Housing has been one of the few bright spots for
the economy over the
past
year. By region, housing starts posted the biggest gain in
the West in
January, an increase of 9.9 percent to an annual rate of
522,000 units.
Housing construction was also up in the South, rising 3.8
percent to an
annual
rate of 839,000 units in January. The other two regions of
the country had declines in housing starts in
January, reflecting severe winter weather.
The biggest drop was in the Northeast, where housing starts
fell by 16.7 percent to an annual rate
of
135,000 units, a decrease that was attributed in part to bad
weather
conditions.
Construction activity fell by 11.9 percent in the Midwest to
an annual rate of 354,000 units.
