The Commerce Department reported Tuesday that construction began on more houses and apartment buildings in February than January and that builders applied for permits at the fastest pace since June 2008, lending credence that the U.S. housing market continues to build momentum.
The government agency said that housing starts rose 0.8 percent to a seasonally adjusted annual rate of 917,000 last month, up from the 910,000 in January (upwardly revised from 890,000). That’s also the highest level since June 2008, outside of the 982,000 annual rate recorded in December. Compared to February 2012, housing starts were up by 27.7 percent.
The report was basically in line with economist expectations for the month following a worse-than-expected month of January. In January, starts were slowed by a stark drop in the volatile multi-family housing category.
Single-family housing starts, the largest component of new starts, were estimated at a 618,000 annual pace for February. The rate for buildings with five units or more was 285,000.
Building permits, a barometer of future demand, rose 4.6 percent in February to 946,000, the highest figure in going on five years. The February mark is about 34 percent higher than the number of permits in February 2012.
In February, permits for single-family homes rose 2.7 percent from January to a 600,000 annual rate.
Home building contributed to U.S. economic growth in 2012 for the first time after six years of contraction. Aggregate data showing that the housing industry is gathering steam through the end of last year and now into the beginning of 2013 is signaling that the housing industry will once again support gross domestic product expansion and potentially offset any damage from a more stringent fiscal policy coming from Washington.
Steadying unemployment, historic low interest rates and a shriveled inventory of pre-owned homes are helping bolster groundbreaking on new homes. Last month the National Association of Realtors reported that the nation’s inventory of existing homes was only 1.74 million, the lowest level since December 1999. At the current pace of existing home sales, the inventory would be depleted in just 4.2 months, the lowest rate since April 2005.
Tempering any overzealousness about a growing housing market is the fact that starts are still about 60 percent lower than the peak annual rate of 2.3 million in 2006 before the housing bubble burst.
The markets are taking the as-expected housing data in stride and recovering modestly from a sell-off on Monday sparked by a controversial new levy on bank deposits in Cyprus that rattled the markets globally. Early in trading the Dow Jones Industrial Average is up by 30 points, the broader S&P 500 has inched up by 1 point and the tech-rich Nasdaq is ahead by 2 points.