U.S. Housing Starts Fall, Store Sales Up
Reuters
Wednesday, February 18, 2004; 10:51 AM
By Mark Felsenthal
WASHINGTON (Reuters) - U.S. housing starts fell more sharply than expected during a snowy January, but chain store sales and mortgage applications rose last week in signs of resilient consumer appetite, reports showed on Wednesday.
Housing starts fell to their lowest since August, but economists said bad weather prevented builders from meeting a strong demand for homes.
Residential construction starts tumbled 7.9 percent last month to a seasonally adjusted annual rate of 1.903 million from a downwardly revised 2.067 million rate in December, the Commerce Department said. December housing starts had been at the highest level since February 1984.
Analysts polled by Reuters were expecting starts to cool to a 2.0 million rate in January.
Despite the large decline, economists said starts were strong given the cold, snowy January in much of the country.
"It doesn't look like a very bad report to me," said Kurt Karl, chief U.S. economist for Swiss Re.
Permits, an indicator of builder confidence, declined 2.8 percent to 1.899 million units from a 1.953 million rate in December. The drop was in line with analyst expectations.
HOME LOAN APPLICATIONS
Housing has boomed in recent years as mortgage interest rates dipped to lows not seen since the early 1960s. Rates have remained close to that level, although they rose slightly last month as the U.S. economic recovery appeared to gain strength.
Economists expect 2004 housing activity to be slightly weaker than last year, but still post a very strong showing.
Rates on U.S. 30-year and 15-year fixed-rate mortgages have averaged between 5.64 percent and 5.72 percent in the last five weeks as financial markets gauged whether a recent pickup in economic growth would push the Federal Reserve to raise short-term interest rates for the first time since 2000.
However, last week rates fell to their lowest in seven months, and a trade association report on Wednesday showed Americans filed more mortgage requests in the week.
The Mortgage Bankers Association said its seasonally adjusted market index, a measure of weekly mortgage activity, rose by 4.9 percent to 837.1 for the week ending Feb. 13 from the previous week's 797.8. Average 30-year mortgage rates fell 14 basis points to 5.46 percent, the lowest rate since the July 11 week last year.
Mortgage demand experienced a spike to a five-month high at the start of the year when mortgage rates fell sharply. But the appetite for home loans had suffered a three-week decline from the mid-January peak as rates have inched higher.
VALENTINE'S DAY SHOPPING
In the retail sector, spring promotions and Valentine's Day shopping bolstered U.S. chain store sales in the latest week, Redbook said in a report on Wednesday.
The pace of sales at major retailers grew by 5.2 percent on a year-over-year basis for the week ended Feb. 14, up from the preceding week's 4.4 percent pace, the report said. Sales in February so far were up 0.8 percent compared with January.
Milder weather across the country in the latest week aided sales of spring merchandise, and Valentine's Day falling on a Saturday increased store traffic, the report said.
The Redbook data are compiled from a sample of same-store sales at general merchandise retailers representing about 9,000 stores. Same-store sales measure revenue at stores open at least one year.
Federal Reserve Chairman Alan Greenspan testified last week the U.S. economy is poised for strong, lasting growth but said policy-makers can be patient about raising interest rates, though not indefinitely.
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