- The Washington Times - Thursday, February 16, 2006

ASSOCIATED PRESS

Construction of new homes and apartments, defying forecasts of a housing slowdown, shot up in January at the fastest pace in more than three decades.

The Commerce Department reported yesterday that building activity was up 14.5 percent last month when compared with December, pushing construction to a seasonally adjusted annual rate of 2.276 million units.

That was the fastest construction rate since March 1973, but it was expected to be a one-time blip caused by unusually warm weather in January that prompted builders to start work on more homes. Analysts are forecasting that housing construction will slow this year as the nation’s five-year housing boom quiets down.

In other economic news, the number of Americans filing claims for unemployment benefits rose to 297,000 last week, up 19,000 from the previous week. The increase was larger than economists had been expecting but they cautioned against reading too much into the one-week rise.

They said the level indicates a strong job market.

Ian Shepherdson, chief U.S. economist for High Frequency Economics, said jobless claims are likely to bounce around quite a bit for a few weeks, reflecting the disruptions in filing claims caused by the weekend’s huge snowstorm in the Northeast.

The weather played a major factor in the big rise in construction last month, which was the mildest January in more than a century. Some economists, however, said that a 6.8 percent rise last month in building permits, which are not affected by the weather, could be a signal that housing activity will not slow as much this year as previously thought as long as mortgage rates do not rise too quickly.

“Low, long-term rates and a strong jobs market will continue to provide substantial support to the housing market,” said Bob Walters, chief economist for Quicken Loans, an on-line lender.

The 14.5 percent rise in construction activity in January followed a 6.9 percent drop in December. Analysts had been expecting a modest rebound. Still, they forecast that residential construction will decline about 6 percent in 2006.

from last year’s 2.07 million units.

For January, construction of single-family homes rose by 12.8 percent to an annual rate of 1.819 million units, an all-time high. Construction of multifamily units was up 21.9 percent to an annual rate of 457,000 units.

Permits, considered a good indication of future activity, rose as well in January to an annual rate of 2.217 million units. Applications for building permits had been down 4.1 percent in December.

Sales of both new and existing homes have set records for five consecutive years as unusually low mortgage rates have spurred demand. However, mortgage rates have started rising, reflecting a continued campaign by the Federal Reserve to boost interest rates in an effort to keep inflation pressures from increasing.

Forecasters believe that sales of both new and existing homes will decline slightly this year and prices, which have been surging, will rise but at a slower pace than the double-digit gains seen in much of the country in recent years.


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