WASHINGTON – The number of new housing projects builders broke ground on in February plunged by 11 percent, the sharpest decline in nearly a decade, as bad weather and an uncertain economic climate took its toll on the residential construction market.
Housing construction dropped to a seasonally adjusted annual rate of 1.62 million units in February, representing a 11 percent decline from the month before, the Commerce Department reported Tuesday.
The level of housing activity in February was weaker than the 1.75 million pace economists were forecasting.
The housing and residential construction markets have been one of the few bright spots of the ailing economy. But Tuesday's report raised new questions about the extent to which the residential construction market will continue to serve as a pillar supporting the sagging national economy.
Home builders, meanwhile, are less optimistic about sales prospects for March, as well as for the next six months, despite rockbottom mortgage rates, a new monthly survey by the National Association of Home Builders showed.
"Even as the lowest mortgage rates in decades continue to support new-home sales, builders are understandably concerned about continued economic weakness, the situation in Iraq and the anticipated effect of these developments on consumer behavior, " said Kent Conine, president of the National Association of Home Builders.
Last week, rates on 30-year mortgages fell to a record low of 5.61 percent, the fourth week in a row that weekly rates dropped to new lows, according to Freddie Mac, the mortgage company.
Super-low mortgage rates are feeding a home-mortgage refinancing boom. As consumers swap higher-interest rate home loans for lower-interest rate ones, the extra cash has helped to support consumer spending, a main force keeping the economy going.
But consumers have turned more cautious amid the uncertain economic environment and a worsening jobs market.
The 11 percent drop in housing construction in February marked the biggest decline since a 17 percent plunge in January 1994.
The number of single-family homes started in February from the month before plummeted by 13.7 percent to a seasonally adjusted annual rate of 1.30 million. The decline was the biggest since January 1991.
Construction of apartments, condominiums and other multifamily housing, however, rose to a pace of 297,000 in February, a 5.7 percent increase from January's level.
By region, total housing construction was flat in the Northeast at a seasonally adjusted annual rate of 142,000 units.
In the Midwest, construction fell by a sharp 19 percent to a rate of 282,000. In the South, housing construction went down by 9.4 percent to a rate of 742,000, and in the West the number of housing projects fell by 11.1 percent to a pace of 456,000 units.
Snow snows and bad winter weather affected many parts of the country in February.
In January, housing construction dipped by 0.1 percent from December's level.
Federal Reserve Chairman Alan Greenspan recently warned that the red-hot housing market was likely to cool this year, something that would slow consumer spending.