Washington, March 18 (Bloomberg) -- U.S. housing starts fell in February by the most in nine years as winter weather hampered construction in the South and Midwest. Builders broke ground on new homes at an annual rate of 1.622 million units, down 11 percent from January's 1.822 million, the Commerce Department said. The February pace was the slowest since April 2002 and compared with expectations of a 1.728 million pace, according to the median of 58 forecasts in a Bloomberg News survey. Mortgage rates have fallen to the lowest on record and building permits, a gauge of future construction, increased to a pace that exceeded last year's average. Housing, which accounts for more than half of all construction and stimulates spending on building materials and home furnishings, is expected to help underpin the economy, economists said. ``It's pretty hard to start houses when the ground is frozen and buried under a couple feet of snow,'' said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. Hoffman had forecast a decline in starts to 1.6 million. ``Permits are telling you it's going to rebound in March and April. Housing activity this spring is going to be a source of strength for the economy.''
Federal Reserve
The decline in February was the largest since a 17 percent plunge in January 1994. Federal Reserve policy makers, who meet today to decide on interest rates, probably won't see the decline in starts as a sign weakness, said Chris Low, chief economist at FTN Financial in New York. Central bankers will probably keep their benchmark overnight bank rate at the lowest since 1961. Some 62 of 72 economists surveyed expect the central bank to hold the rate at 1.25 percent, while possibly signaling a future reduction if needed. Starts of single-family homes fell 13.7 percent in February, the biggest decline since January 1991, from a 1.501 million-unit rate in January. One-family homes account for eight of every 10 houses built. January starts of multifamily homes, such as apartments and condominiums, rose 1.9 percent to a 327,000 annual rate. Building permits rose 0.4 percent to 1.786 million units at an annual rate from 1.779 million units in January, today's report said. Last year, when starts were the highest since 1986, permits averaged 1.717 million. February permits for apartments on other multifamily homes rose 28 percent. They fell 6.8 percent for single-family homes.
Regions
By region, starts slumped 19 percent in the Midwest to 282,000. They fell 9.4 percent in the South, which includes Maryland, Washington D.C. and Virginia, where snowfalls during the President's Day weekend were upwards of two feet. Power outages were widespread and many main roads were closed for several days. Home construction fell 11.1 percent in the West to 456,000 homes at an annual rate. Starts held at 142,000 in the Northeast. The average rate on a 30-year mortgage was 5.86 percent last week. That was close to the 5.85 percent at the start of January, which was the lowest since the 1960s, according to Freddie Mac, the second-largest buyer of mortgages, behind Fannie Mae.
Homebuilders say backlogs keep mounting, which may sustain construction for several more months. Toll Brothers Inc., the largest U.S. builder of luxury homes, said last month first- quarter sales jumped 16 percent, while its backlog of homes increased 34 percent from the year-ago period. While many economists were quick to dismiss the storm as a one-time event, some say a slip in new home sales in January suggests that the housing boom may be starting to slow. New home sales dropped that month to a 914,000-unit annual rate, the slowest in a year and down 15.1 percent from December's record 1.077 million-unit pace. The National Association of Home Builders said yesterday that its gauge of the housing market fell this month to the lowest since November 2001. The index of homebuilders declined to 52 in March from 62 a month earlier. Current sales, expectations and traffic of perspective buyers all declined in March. ///www.quote.bloomberg.com