Construction of Homes Up 16.7% in West : Housing: February's big rise is partly because of harsh weather in January. Housing starts rose 2.5% nationwide.


Construction of new homes surged an unexpected 16.7% in the West last month, the Commerce Department said Tuesday, reconfirming beliefs that 1993 will be the California housing market's best in three years.

Nationwide, housing starts rose a modest 2.5%, the department said.

A pickup in February starts was expected by most analysts because heavy rains in the West and snow in the East had pushed starts down 8.4% nationwide in January.

But the big jump in starts in the western region--which is dominated by California--surprised some analysts.

"Everyone expected a rebound from January, but 16.7% is surprisingly high," said Ben Bartolotto, an economist and research director for the nonprofit Construction Industry Research Board in Burbank.

Bartolotto said the February gain helped to put California's housing industry "back on track," and predicted that about 110,000 single-family homes and apartments would be built in the state this year.

If Bartolotto's forecast proves correct, 1993 would be the best year for builders in the state since 164,000 units were started in 1990.

Commerce said starts across the nation were made at a seasonally adjusted annual rate of 1.208 million units last month, slightly ahead of January's revised 1.178-million-unit rate but down 6% from the 1.285-million-rate in February of last year.

Most of the gains came from the West, where housing starts rose to a 251,000 unit rate in February from January's 215,000 units. But last month's rate was 14% lower than the rate set in February of last year, when construction surged after interest rates had plunged.

Construction rose 7.4% in the Northeast in February from January and climbed 7% in the Midwest. Housing starts fell 6.3% in the South.

The lowest interest rates in two decades also fueled last month's starts. Rates on 30-year, fixed-rate mortgages averaged 7.79% in February, according to the New Jersey-based mortgage research firm HSH Associates, down from 8.12% in January and the lowest since 1973.

Builders' renewed confidence in the future of the Southland's housing market has encouraged many of them to move up their construction timetables for projects they had originally planned to start later in the year.

For example, Kaufman & Broad Home Corp., the state's biggest builder, originally expected to start building homes at 18 new Southland communities by the start of September. But all 18 are now underway, and 10 more projects that weren't expected to open until the end of the year will now open by mid-summer.

"Demand has been stronger than we originally expected, so we have stepped up production," said Eric Elder, K&B;'s vice president of marketing.

Still, officials at the National Assn. of Home Builders worried that continued increases in the price of lumber could dampen both starts and sales this spring, historically the busiest season of the year.

Lumber prices have nearly doubled over the last five months, the trade group said, adding as much as $5,000 to the cost of a 2,000-square-foot new home.

"Some builders are waiting to see if (lumber) prices will drop, and that could translate into lower sales and construction starts in the months ahead," said Roger Glunt, a Pennsylvania builder and the trade group's president.

Housing Starts

Seasonally adjusted, annual rate. Millions of units.

Feb., '93: 1.21 Jan., '93: 1.18 Feb., '92: 1.29 Source: Commerce Department

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