Construction of new homes and apartments, propelled by low mortgage rates and good weather, jumped 6 percent in February to the highest level in more than a decade.
The Commerce Department reported today that construction of new single-family homes and apartments rose to a seasonally adjusted annual rate of 1.64 million units.While the Asian crisis is expected to dampen economic activity, the impact so far has been favorable as financial turmoil in that part of the world has driven investors to seek the safety of U.S. investments, with the rising demand pushing U.S. interest rates lower.
In January, mortgage rates fell to a four-year low, triggering a surge in housing demand. The housing market also has been helped by the unseasonably mild winter in many parts of the country, courtesy of El Nino.
The 6 percent increase in housing construction in February followed a smaller 0.2 percent rise in January. The 1.64 million annual rate for construction was the highest since housing starts climbed to 1.66 million units in November 1987.
In another signal of the strong economy, the number of Americans behind on their credit card payments dropped to the lowest level in three years during the final three months of 1997.
"After a long cold spell of rising delinquencies, this is the first sign of a spring thaw," said association economist James Chessen. He attributed the decline to the strong economy and tighter lending standards by banks.
The housing industry has said its boom is the result of the falling mortgage rates and an economy that has pushed the unemployment rate to the lowest level in 24years, helping to boost consumer confidence to record levels.
The housing report showed that construction on single-family homes rose 4.3 percent in February to an annual rate of 1.27 million units, the highest level for this category since March 1994.
Construction of multi-family units was up 12.6 percent to an annual rate of 366,000 units.
Building permits for future construction increased 6.5 percent in February, the biggest gain since a 7.7 percent rise in December 1993.
All regions except the West shared in the February boom. The biggest increase came in the Northeast, a jump of 14.3 percent to an annual rate of 192,000 units, the highest level for this region since February 1990.
Construction rose 10.9 percent in the South to an annual rate of 724,000 units, the highest level since June 1986. Housing starts rose 8.1 percent in the Midwest to an annual rate of 372,000 units.
The only region to suffer a setback was the West, where El Nino has spawned heavy rains and flooding. Reflecting the adverse weather, housing construction fell 7.9 percent. It was the biggest one-month setback since a 19.1 percent plunge in December 1996.