WASHINGTON -- Construction of homes and apartments rose 4.7 percent in January to the highest level in two decades as low mortgage rates continued to power the nation's housing industry.
The Commerce Department reported yesterday that builders began construction on 2.16 million units at a seasonally adjusted annual rate last month, up from a rate of 2.06 million units in December.
The January increase caught economists by surprise. They had been forecasting a decline of around 3.7 percent, reflecting rain in the West and winter storms in the East, which had been expected to hold down construction activity.
Instead, builders, enthused by continued low mortgage rates, 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.
Freddie Mac reported last week that rates on 30-year mortgages had fallen for a sixth consecutive week to 5.57 percent.
In other economic news, the Federal Reserve reported that output at the nation's factories, mines, and utilities was unchanged in January after a sharp 0.7 percent increase in December. The January performance was a disappointment to economists who had been forecasting an increase in industrial production of around 0.3 percent for the month.
Output at the nation's factories did increase by 0.4 percent, the same gain as in December. But output at the nation's utilities fell a sharp 3 percent, after an increase of 2.8 percent in December.