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 (search) 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.
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.
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 (search).
"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.