Washington, April 16 (Bloomberg) -- U.S. housing starts rebounded in March, spurred by cheap financing and better weather, economists said they expect the government to report today. Builders probably broke ground on new homes at a 1.7 million- unit annual rate, up 4.8 percent from February's 1.622 million, a survey of economists found. The 11 percent drop in starts from January was the most in nine years. In 2002, the industry started 1.705 million new houses, the most since 1986. With war looming last month, Treasury bond yields dropped as investors sought a safe haven. That caused mortgage rates to fall to the lowest on record and helped offset sinking consumer confidence, economists said. A thaw from the worst snowstorms in seven years in some parts of the country made it possible for builders to get construction under way.
``Extremely low mortgage rates have continued to support home sales at robust levels,'' said Steven Wood, principal economist at Insight Economics LLC in Walnut Creek, California, before the report. ``With relatively lean inventories, housing starts increased to meet strong demand.'' The Commerce Department is to issue the statistics at 8:30 a.m. Washington time. The projection of housing starts is based on the median of 64 forecasts in a Bloomberg News survey of economists. The consumer price index, the government's broadest gauge of inflation, rose 0.4 percent in March, economists said they expect the Labor Department to report. Increased gasoline prices probably helped push the index up. The Labor Department is to issue the statistics at 8:30 a.m. Washington time.
Low Inflation Seen
Excluding food and energy, consumer prices probably increased 0.2 percent after rising 0.1 percent in February, a Bloomberg News survey of 67 economists found. That would indicate inflation is under control. With inflation excluding energy tame, the Federal Reserve has kept interest rates at a 41-year low of 1.25 percent since November. For now, Fed policy makers may be more focused on growth after reports yesterday showed that industrial production dropped in March for a second straight month and a gauge of manufacturing in New York state posted the largest decline since October 2001. ``The Fed is in a situation in which it can afford to be quite patient,'' said William Poole, president of the Fed Bank of St. Louis, last week. ``We have a very high degree of financial stability, inflation expectations are low, current inflation is low.''
Homebuilders' Survey
The National Association of Home Builders' housing market index, a gauge of builder sentiment, was 52 in April, matching the March reading, which was the lowest since November 2001. A gauge of optimism for the next six months jumped to 62 from 56, the largest point gain since September, suggesting that better days for housing and the economy are ahead. The average rate on a 30-year fixed mortgage dropped to 5.61 percent in the second week of March, according to Freddie Mac, the No. 2 buyer of mortgages. That was the lowest since the group began keeping records in 1971. Applications for mortgages to buy a home rose, a signal that sales may increase. The Mortgage Bankers Association of America's purchase index averaged 360.2 in March, up from 329.5 in February and from the average of 354.7 in 2002, the record year for sales. The index reached 400.8 last week, the highest since September. Ryland Group Inc.'s orders are reflecting the pickup in applications. The builder, based in Calabasas, California, said this month that new orders for the quarter ended March 31 were a record 4,260, 13.4 percent higher than the same period last year. The backlog of orders increased to 6,678 homes, the highest on record for the first quarter.
Assist From Weather
The weather also cooperated last month. The average national temperature in March was 44 degrees Fahrenheit, 1.6 degrees warmer than the 1895-2003 average, according government statistics. The amount of rainfall, at 2.34 inches, was just under the average of 2.4 inches. In February, the average temperature was 33.3 degrees Fahrenheit, 1.2 degrees cooler than the 1895-2003 average, and snowfalls in the Northeast were the heaviest in seven years. The improved weather brought about more hiring. Builders added 21,000 construction workers to payrolls in March, the most since August, after cutting 42,000 jobs the previous month, according Labor Department figures. For the year, housing starts are forecast to total 1.69 million, falling just short of the 16-year high reached in 2002. //www.bloomberg.com