Housing construction, bolstered by low interest rates and good weather, climbed in February to its highest level in more than three years.
Home builders broke ground in February on 1.77-million housing units, at a seasonally adjusted annual rate, which was 2.8 percent more than in January, the Commerce Department reported Wednesday.
February's larger-than-expected increase pushed housing construction to its highest level since December 1998 and followed a strong 7.4 percent advance in January, even bigger than the government previously reported.
All of the strength last month came from single-family home construction, which rose 7.4 percent to a rate of 1.46-million in February, the highest level in more than 23 years.
The number of apartments, condos and other multifamily housing fell by 12 percent to a rate of 264,000. Economists think that drop reflected in part weaker demand for rental housing as low mortgage rates and solid appreciation in home values have made buying a home attractive.
"Builders are still seeing home buyers really excited about the investment aspects of home ownership and about good financing conditions," said David Seiders, chief economist for the National Association of Home Builders.
Loretta Lombardo, marketing manager for the West Florida division of Ryland Homes, said her company saw a surge in new home contracts after a sluggish January. One reason, she said was that Ryland, which builds homes in the $110,000 to $300,000 range, added incentives to its packages such as bonus options at no charge.
Jorge Echarte, general contractor with First Dartmouth Homes in St. Petersburg, said after a lull at the end of the year there's been a pickup in contracts. "There are signs of a nice turnaround," said Echarte, whose company is building 150 homes in Manatee County, as well as on scattered sites in Pinellas County. First Dartmouth's homes are valued at up to $1-million, he said.
The Tampa and Orlando divisions of national homebuilder Morrison Homes were second only to Sacramento in performance last year and Mike Malloy, vice president of sales and marketing in Tampa said that's remained true for the first months of 2002.
"We saw some markets take a dip for a month or two after Sept. 11, but for us it was a week," Malloy said. His company started 28 homes at an average price of $190,000 in February.
Marvin Rose of Rose Residential Reports in Tarpon Springs said he had not yet compiled data on new home permits in the Tampa Bay area for February, "but anecdotally, builders are telling me the market remains very strong."
Florida housing numbers may be misleading once they do arrive. "There was a major code change in March, so there may be a big bubble in February permits that won't mean much," Rose said.
A survey by the national home builders' association showed that companies are more optimistic about sales prospects for March as well as for sales in the next six months.
"Low interest rates, resilient home values and a stabilizing economy have helped home buyers put whatever fears they might have had following Sept. 11 behind them, which in turn has produced renewed builder optimism," said National Association of Home Builders president Gary Garczynski, a builder and developer from Woodbridge, Va.
The Federal Reserve's 11 interest rate cuts last year resulted in commercial banks lowering their prime lending rate _ a benchmark for many consumer and business loans _ to 4.75 percent, a level not seen since November 1965.
Fed chairman Alan Greenspan and his colleagues decided Tuesday to continue holding short-term interest rates steady. But they also expressed more optimism that the country is bouncing back nicely from the recession that began last March. That prompted many economists to predict the Fed will begin to raise rates as early as May.
With the recovery gaining steam, analysts predict that longer-term mortgage rates will rise but remain at a level that would make buying a home affordable for many prospective buyers.
The average interest rate on a 30-year fixed-rate mortgage rose to 7.08 percent last week. Some economists think 30-year rates will hit a high of 7.5 percent by the end of this year.
Economists said the brisk activity in new housing construction in both January and February will be a factor contributing to economic growth in the first quarter of this year. Some economists think the economy, which grew at a 1.4 percent rate in the fourth quarter of 2001, could expand at a sizzling rate of 5 percent or more in the current quarter.
By region, housing construction rose 14 percent in the West to a rate of 432,000. In the South, construction grew by 0.9 percent to a rate of 828,000 and in the Midwest, starts rose by 0.8 percent to a rate of 363,000. But in the Northeast, housing construction fell by 9.3 percent to a rate of 146,000.
Economists say that consumers' spirits are being lifted with increasing evidence that the economy is rebounding from a recession. The manufacturing sector, which had been hardest hit by the slump, appears to be mounting a comeback. Also, for the first time in seven months, businesses added jobs in February, helping to push the nation's unemployment rate down to 5.5 percent.
_ Times staff writer Kris Hundley contributed to this report, which includes information from the Associated Press.