Home Building Down Slightly in February

Home construction dropped slightly last month from the two-year high reached in January, the government reported Tuesday. However, analysts dismissed the decline as only a small setback in what remains a boom time for housing.

The Commerce Department reported that construction of homes and apartments edged down 3.5% in February to a seasonally adjusted annual rate of 1.99 million units.

This level of building activity was 22% higher than a year ago and was the second-highest monthly level of the past two years, behind only a 2.06-million-unit pace set in January.

At the White House, spokesman Larry Speakes said: “With interest rates at their lowest levels in more than seven years, the housing sector should expect its strongest year in a decade.”

Analysts Optimistic

Private analysts also were optimistic that the recent housing boom will continue, spurred by falling mortgage rates. A nationwide survey by the Federal Home Loan Mortgage Corp. found that fixed-rate mortgages averaged 10.01% last week.

Glenn Crellin, an economist for the National Assn. of Realtors, predicted that sales of both existing and new homes should rise sharply this year.

“With the improved level of housing affordability, we expect existing-home sales to jump about 13% this year and new-home sales to increase in the range of 7% to 8%,” he said.

James Christian, chief economist for the U.S. League of Savings Institutions, said mortgage rates will probably not drop much lower but will likely hold at their current level at least through the summer.

“I think we will have a handsome home-buying season this spring and into the summer as long as home prices don’t start rising too fast,” he said.

The weakness in construction last month came entirely in the South, where starts plunged 20.8%.

Housing activity rose 18.1% in the Northeast to an annual rate of 418,000 units, the strongest pace in this region since the Commerce Department began keeping records in 1959.

Up 5% in the West

Housing starts jumped 10.7% in the Midwest to an annual rate of 352,000 units, the strongest pace since September, 1979.