Home Building Surges, Boosting U.S. Recovery
U.S. builders broke ground on single-family homes in February at the fastest pace since the late 1970s, and economists say the sector that helped offset the broader economic slump is set to assist in the recovery.
The Commerce Department said Wednesday that overall housing starts raced ahead by 2.8% to a seasonally adjusted annual rate of 1.77million last month, the fastest pace in more than three years. Construction starts on single-family homes, the largest portion of the larger number, rose 7.4% to a 1.46-million annual pace, the strongest clip since December 1978.
“The immediate implication for the economy is that the recovery, which has gained a toehold on the beach, is moving inland,” said Ken Mayland, president of ClearView Economics in Pepper Pike, Ohio.
Housing growth often presages a rise in retail sales as consumers move to furnish their new dwellings. Residential housing was a pillar of strength for the economy last year, and economists believe it will turn in a solid, although slightly less spectacular, performance in 2002.
Bob Dederick, economic consultant for Northern Trust Co. in Chicago, said the starts report, which also showed an increase in building permits issued for future home building, was a “picture of unalloyed strength.”
“This is the first piece of evidence that, yes, final demand is hanging in there nicely,” he said.
That prospect may cause the Federal Reserve to reassess how quickly it wants to begin reversing the 11 interest rate cuts it made in 2001 to lift the economy out of recession.
The continued strength of housing could stimulate consumer spending, and some analysts said that would help the economy post a strong growth rate in the first quarter.
In California, builders pulled permits at an annual rate of 148,070 in January, down 15% from the month before and 20% from a year earlier, according to state figures based on a monthly report from the Construction Industry Research Board, a Burbank firm. California’s February data are not available yet.
But Ben Bartolotto, who compiles the report, forecasts that February data on construction of single- and multifamily projects in California will decline about 3.5% from last year’s estimated pace of 148,291 units. He said the sluggish economy, the threat of higher interest rates and the lack of buildable land would curb production this year.
Miami-based Lennar Corp., the second-largest U.S. home builder, reported Wednesday that profit rose 40% in its fiscal first quarter, beating analysts’ estimates. Most of the home sales during the quarter were for homes ordered before the Sept. 11 terrorist attacks, however.
Lennar’s net income for the period ended Feb. 28 was $71.9 million, or $1.03 a share, up from $51.3million, or 75 cents, a year earlier. Revenue increased 13% to $1.2billion, Chief Executive Stuart Miller said. Shares fell $2.17 to at $52.62 on the New York Stock Exchange.
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Housing Starts
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