9.6% jump in Feb. housing starts tied to low rates

March 22, 1992|By Mark Kollar | Mark Kollar,Knight-Ridder News Service

CHICAGO -- The dramatic rise in U.S. housing starts during February shows that consumers were rushing to take advantage of a relatively low interest rate environment, economists said.

Also, good weather conditions and expectations that first-time home buyers may receive tax credits increased demand in the housing industry, they said.

The Commerce Department Tuesday said housing starts rose 9.6 percent in February to a seasonally adjusted 1.304 million units, the highest level since March 1990.

Commerce also revised its January starts number to up 6.4 percent from up 5.5 percent.

February housing starts rose 14.3 percent in the Midwest, 10.0 percent in the West, 7.6 percent in the Northeast and 6.8 percent in the South.

An upturn in interest rates in February, after a steady fall since the end of the year "stimulated buying," said David Seiders, chief economist of the National Association of Home Builders in Washington.

Interest rates on 30-year fixed mortgages fell to a low in January of about 8.38 percent and began to turn up in February, Mr.

Seiders said. The slight nudge up in rates last month "brought in buyers who were on the fence," he added.

"The report is continued evidence that the U.S. economy is pulling itself out of a hole," said David Wyss, economist at Data Resources in Lexington, Mass.

Broad-based strength in starts, particularly for single-family units, indicates consumers still perceive rates at rather low levels and are jumping back into the housing market, he said.

Mike Niemira, economist at Mitsubishi Bank in New York, agreed that the key to the jump in February starts was the generally low interest-rate environment.

The low rates in January "triggered" demand for unsold homes and cleared the market to build houses in February, he added.

Mr. Niemira warned, however, that the rebound in rates recently might spell disaster for housing. It's uncertain at this time "if the momentum can be sustained" in the long run, he added.

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