WASHINGTON -- Construction of new homes and apartments rose in January to the highest level in 16 years as low mortgage rates continued to power a housing boom, the government reported Wednesday.
The Commerce Department said that work was started on 1.850 million units at a seasonally adjusted annual rate in January, up 0.2 percent from 1.847 million units in December.
The gain reflected the fact that low mortgage rates, which fueled record sales of both new and existing homes in 2002, remained at enticing levels in January. Freddie Mac reported that the nationwide average for 30-year mortgages stood at 5.86 percent last week, only a tick higher than the 40-year low of 5.85 percent set in the first week of January.
Housing has been one of the few bright spots for the economy over the past year. The country has struggled to mount a sustainable rebound from the 2001 recession in the face of continued widespread job layoffs as many corporations have had to deal with weak demand and falling profits.
Federal Reserve Chairman Alan Greenspan told Congress last week that he believed the country would record stronger growth in coming months once the uncertainties surrounding a possible war in Iraq fade away. For that reason, he said it was premature to consider another round of tax cuts to boost consumer demand, dealing a blow to President Bush's efforts to get Congress to enact $1.3 trillion in new tax cuts.
For January, the government said that construction was begun on 1.51 million single-family homes, a gain of 2.1 percent from the December level of 1.48 million units.
Strength in this area offset a drop in construction of apartments, which fell by 8.7 percent to an annual rate of 303,000 units.
For all of 2002, housing starts totaled 1.71 million units, up 6.4 percent from 1.60 million units started in 2001. Last year marked the best year for housing construction since 1986.
Economists are looking for another strong year for housing in 2003 as mortgage rates are expected to stay at low levels for months to come. The Federal Reserve continues to pursue an easy credit policy in an effort to bolster what so far has been a weak and jobless recovery.
By region of the country, housing starts posted the biggest gain in the West in January, an increase of 9.9 percent to an annual rate of 522,000 units. Housing construction was also up in the South, rising 3.8 percent to an annual rate of 839,000 units in January.
The other two regions of the country suffered declines in housing starts in January. The biggest drop was in the Northeast, where housing starts fell by 16.7 percent to an annual rate of 135,000 units, a decrease that was attributed in part to bad weather conditions.