Groundbreaking on new U.S. homes slowed sharply in February as harsh weather unexpectedly pushed housing starts to their lowest level since April 2002, a report said Tuesday.
The Commerce Department said starts tumbled 11% -- the largest drop since January 1994 -- to a seasonally adjusted annual rate of 1.62 million units.
Wall Street analysts had anticipated a slowing in starts from the rapid pace of recent months but the drop was larger than they had expected. Economists had forecast starts to fall to a 1.72-million-unit annual rate and permits to dip to a 1.73-million-unit annual clip.
But in a sign that the drop was largely related to severe winter weather, permits for home building rose slightly and the number of homes under construction showed only a small decline. Permits gained 0.4% to a 1.79-million-unit annual rate and houses under construction at the end of the month fell 0.3% to a 1.05-million yearly pace.
"A lot of it is probably weather-distorted," said Gary Thayer, chief economist with A.G. Edwards & Sons in St. Louis. "If this had been a normal winter these numbers would have been a concern. But I think we have to wait another month or two to get a true picture of the housing sector."
Tuesday's report was the second unexpectedly weak measure of the housing market in as many days. The National Assn. of Home Builders monthly index, out Monday, posted a record decline in March, dropping to its lowest level since November 2001. The index measures homebuilders' outlook for activity, based on current sales of single-family homes, sales expectations and traffic in prospective buyers.
Still, economists say low mortgage rates should continue to support the housing market, which has been one of the few economic bright spots.
In the Commerce Department report, January starts were revised downward, to an annual rate of 1.82 million units from the previously reported 1.85-million-unit rate.
In February, starts of single-family homes fell 13.7%, the biggest monthly decline since January 1991.
Overall starts, including both single- and multifamily homes, were down in three of the nation's four regions. The Midwest saw a 19% decline, while the West posted an 11.1% drop. The South region saw starts dip by 9.4%, while in the Northeast, starts were unchanged from the previous month. Single-family starts in the Northeast, though, were down by 8.9%.