Home Construction Sees Surprise Gain In February

Home construction defied recession logic with an unexpected increase in February, the Commerce Department reported Tuesday.

Construction of new homes and apartments rose 22.2 percent from January to a seasonally adjusted annual rate of 583,000 units. Economists were expecting construction to drop to a pace of around 450,000 units. The only region not showing an increase was the West.

A close examination of the data, however, shows that much of the jump involved apartment construction, which is considered much more vulnerable than the overall housing sector. That could presage a short-lived rebound.

Even with last month's surprise gain, home construction was still down 47.3 percent from a year ago. The government also released revised figures for January, showing that construction activity fell to a pace of 477,000 units in January — slightly higher than first reported but still marking a record low.

Meanwhile, the Labor Department reported that the seasonally adjusted producer price index increased by 0.1 percent last month, compared with a 0.8 percent gain in January. Most analysts had been expecting a 0.4 percent advance.

The numbers gave some heart to Wall Street, which opened mixed after closing down on Monday.

But the new housing starts could be bad news for anyone trying to unload his home amid an unprecedented glut of "for sale" signs.

Underscoring the problem, the median home price in Southern California, one of the nation's hardest-hit markets, dropped 39 percent in February from a year ago, according to MDA DataQuick.

The tracking firm said the median home price in a six-county region of Southern California plunged to $250,000 last month, compared to $408,000 in February of 2008. The median price for the area peaked at $505,000 in mid-2007.

Foreclosures accounted for more than 56 percent of February in the area, DataQuick said.

The Obama administration has announced a $75 billion program to stem skyrocketing home foreclosures, which have helped saturate the market with properties. More than 2 million homeowners faced foreclosure proceedings last year, according to a report last month from Credit Suisse.

Applications for building permits, considered a reliable sign of future activity, also rose in February by 3 percent to an annual rate of 547,000. Economists had been expecting permits to fall to a pace of half a million units.

Core producer prices, which exclude energy and food costs, increased 0.2 percent in February compared with a forecast for a 0.1 percent increase, the Labor Department said. That followed a 0.4 percent rise in January. Core producer prices were 4.0 percent higher measured on a year-over-year basis.

From NPR wire services