US housing construction surges unexpectedly in battered market

March 17th, 2009 - 10:01 pm ICT by IANS  

By Arun Kumar
Washington, March 17 (IANS) In a welcome sign for America’s fractured housing market, construction of new homes has unexpectedly rebounded with a 22 percent jump in February after falling for eight months.

Housing starts rose to a seasonally adjusted annual rate of 583,000 last month, up 22 percent from a revised 477,000 in January, according to the Commerce Department release Tuesday. It was the first time housing starts increased since June, when they rose 11 percent.

Economists were expecting housing starts to decline to 450,000, according to consensus estimates compiled by Still, starts are down more than 47 percent from February 2008, when over 1.1 million new homes broke ground.

New construction of single-family homes, considered the core of the housing market, increased 1.1 percent to an annual rate of 357,000 versus 353,000 in January.

February’s increase was driven by a nearly 80 percent increase in construction of multi-family homes. New construction of buildings with 5 or more units increased 80 percent to 212,000 from 118,000 in January.

Applications for building permits, considered a reliable sign of future construction activity, rose 3 percent to a seasonally adjusted annual rate of 547,000 last month. Economists were expecting permits to fall to 500,000.

While the surge in new construction was a welcome sign for the nation’s battered housing market, analysts cited by warned that the increase could be short lived.

“With new home sales still falling and the months’ supply at a record, there is no reason for homebuilding to rise,” wrote Ian Sheperdson, chief US economist at High Frequency Economics in a research note. “This is a temporary rebound, not a recovery.”

New home construction surged in the Northeast US, jumping nearly 89 percent last month. Starts also increased in the Midwest and the South.

In the West, where the housing market was overbuilt in the boom years and where there is a glut of foreclosed homes, starts declined nearly 25 percent versus the previous month, the report said.

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