The government reported today, a sign that builders may have taken advantage of the unusually warm weather in January, last month, home construction jumped 14.5 percent to a 33-year high.
Many home builders also say they have to offer bigger incentives to lure buyers; the report surprised many analysts because home sales have perceptibly slowed and the number of unsold homes has risen in many markets around the country in the last several months.
The fastest level since 1973, housing starts jumped to an annual pace of 2.28 million, after falling in December with 6.9 percent, after falling 4.1 percent in December, permits for new construction increased 6.8 percent, to 2.22 million.
In the Northeast home building activity was strongest, where starts jumped 29.2 percent; followed by the Midwest, up 23.7 percent; the West, 16.9 percent; and the South, 8.7 percent.
Analysts say, "Warmer weather tends to spur construction activity," and added "and the average national temperature in January, at 39 degrees, was the highest ever recorded by the government and up 8.5 degrees from the historical average for the month."
The unusual weather has also been cited for stronger retail sales and weaker industrial production, the latter because utilities produced less electricity.
David Seiders, chief economist for the National Association of Home Builders said, "It is a time-tested pattern," and added "February has essentially returned to normal conditions, suggesting to me that we will see a substantial decline in housing starts.”
Because January is usually one of the coldest months of the year, those adjustments already bolstered the figures that the Commerce Department reports for the month, the weather effects could be magnified further because most economic data, including housing starts, are adjusted to account for seasonal weather and other patterns.
Before adjusting for seasonal factors, housing starts were up 11.3 percent from December.
Ian Shepherdson, chief economists at High Frequency Economics said in his research note that "Looking beyond the month-to-month numbers, the trend in starts lags the trend in sales, which in turn lags the trend in mortgage applications," and also adding "the latter is plummeting."
Bill Emerson, chief executive of Quicken Loans, a mortgage lender based in Livonia, Michigan, "Everybody would agree that 2006 won't be 2005," and adds "But it will be strong."
By: Dijon Wainwright