"Home building surges in January 2005"

The Associated Press - February 17 2005

Construction of new homes and apartments rose 4.7 percent in January to the highest level in more than two decades as low mortgage rates continued to power the housing industry.

The Commerce Department reported Wednesday that builders began construction on 2.16 million units at a seasonally adjusted annual rate last month, compared with a rate of 2.06 million units in December.

The increase in January caught economists by surprise. They had forecast a decline of about 3.7 percent, reflecting rain in the West and winter storms in the East, which had been expected to hold down construction.

Instead, builders were enthused by continued low mortgage rates and broke ground on the largest number of new homes and apartments since February 1984, when construction starts hit an annual rate of 2.26 million units.

"With cheap mortgages the perfect aphrodisiac, the American love affair with housing continues and developers are more than willing to comply with their customers wishes," said Joel Naroff, chief economist at Naroff Economic Advisors. "Low mortgage rates trump everything else as the housing market continues to boom along."

The report on housing starts showed that construction of single-family homes rose 2.7 percent to 1.76 million units, a record. Construction of apartments climbed 14 percent, to 399,000 units.

In a sign that housing activity should remain strong, applications for building permits rose by 1.7 percent to an annual rate of 2.1 million units in January. Permits for single-family homes were up 0.7 percent and permits for apartments rose 5.3 percent.

In Central Florida, housing construction is continuing at a fast pace, said Anthony Crocco, Central and North Florida Director for MetroStudy Corp., a national research company.

He said many builders have backlogs of hundreds of sold, but unbuilt houses. "I go into a lot of new subdivisions and every vacant lot is sold and waiting for a house to be built," Crocco said.

He said builders are being "very aggressive" on raising prices. That's especially true in the Four Corners area of northeast Polk, west Osceola, southeast Lake and west Orange counties.

Thousands of vacation homes are being built and sold in that area, many to British investors who are taking advantage of the weak U.S. dollar. Crocco said he has seen prices of vacation homes increase by 50 percent over a nine-month period.

The housing industry has been the standout performer in the 3-year-old economic expansion. The industry has been bolstered by the lowest mortgage rates in more than four decades. In June, the Federal Reserve began a campaign to raise rates slowly to make sure a rebounding economy did not generate unwanted inflation.

Jack Snyder can be reached at 407-420-5094 or jsnyder@orlandosentinel.com