Martin Crutsinger, AP Economics Writer
USA Today
WASHINGTON — Housing construction posted a better-than-expected increase in January, pushing activity to the highest level in six months. The solid gain raised hopes that the construction industry is beginning to mount a sustained rebound from its worst slump in decades.
The Commerce Department said Wednesday that construction of new homes and apartments rose 2.8% last month to a seasonally adjusted annual rate of 591,000 units. That was better than the 580,000 economists were forecasting.
Applications for building permits, considered a barometer of future activity, fell 4.9% to a rate of 621,000, but that was after two months of large increases.
In another sign of strength, Wednesday’s report revised up activity in December to show builders were starting construction at an annual pace of 575,000 units that month, much stronger than the 557,000 originally reported. Even with the upward revision, activity fell a slight 0.7% in December, a dip blamed on severe weather in many parts of the country that depressed construction activity.
Economists are hoping that housing is beginning to recover. A rebound in this area would help support the economy as it struggles to mount a sustained recovery from the deepest recession since the 1930s.
The strength last month was led by a 10% jump in activity in the Northeast and an 8.9% increase in the West. Construction was up a smaller 1% in the South and 3.2% in the Midwest.
The strength in January pushed construction activity up 21.1% from the pace in January 2009. Last month’s building rate the fastest pace since July.
Construction of single-family homes rose 1.5% to a seasonally adjusted annual rate of 484,000 units while construction of multi-family units increased 9.2% to an annual rate of 107,000 units.
The National Association of Home Builders said Tuesday that its housing market index rose two points to 17 in February after having fallen for two months.
That increase in sentiment was likely influenced by a number of favorable developments, including a report earlier this month that the nation’s unemployment rate fell in January to 9.7%, still high, but lower than the previous month’s 10%.
Mortgage rates are hovering around historic lows at 5%, pushed down by a Federal Reserve program to buy mortgage-backed securities. And builders say they are also seeing a boost in the demand for homes from a government stimulus program. That program provides tax credits of up to $8,000 for first-time home buyers and up to $6,500 for homeowners who decide to move.
Bob Jones, chairman of the home builders, said builders were “slightly more optimistic that the housing recovery is finally beginning to take root.”
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