Housing starts rebounded in February from a nine-year low, easing concern that the U.S. real-estate slump will worsen and threaten the economic expansion.
Builders broke ground on new homes at an annual rate of 1.525 million last month, up 9 percent from the prior month and more than economists forecast, the Commerce Department said today in Washington. Building permits fell 2.5 percent.
The numbers eased speculation that climbing defaults on subprime mortgages would put additional homes on the market, leading builders to halt more projects and fire workers. At the same time, swings in the monthly figures don't convey the stability desired by Federal Reserve policy makers, who meet today and tomorrow to set interest rates.
The South and West rose 18% and 26.4% respectively. These figures are the primary reason for the increase, as the Northeast dropped 19.7% and the Midwest dropped 14.4%.
Frankly, I have a hard time explaining these numbers. According to the latest new home sales report there is a 6.8 month supply of new homes on the market. In addition, new home sales were down 20% year-over year. Credit standards are tightening. And there are estimates of the subprime problems adding between 500,000 to 1.5 million homes to inventory. This is not the time to be adding to available inventory.