After almost a year of little to no growth in housing starts, last month saw an increase in both housing construction and new building permits.

For the first time in 10 months, housing starts in February rose 22.2 percent above January estimates, the U.S. Census Bureau announced Tuesday. Privately-owned housing starts jumped to an annual rate of 583,000 units last month from the 477,000 units in January.

According to the Census Bureau, construction spending in January totaled $986.2 billion, 3.3 percent below the December estimate of $1,020 billion and 9.1 percent less than the January 2008 estimate of $1,085.4 billion.

Spending on private construction was at an annual rate of $682.6 billion in January, 3.7 percent lower than December’s $709 billion. Public construction spending in January was $303.7 billion, 2.3 percent below December estimate of $311 billion.

The sudden surge in housing construction last month gave a glimmer of hope for the recession-hit economy. Although 47.3 percent below February 2008 totals, this was the biggest percentage rise since January 1990 and the first gain since April last year, Reuters adds.

Analysts said while the data did not show a change in trend for the depressed housing market, it presented a trace of stability that could ease the pressure on the economy going forward. (Image Source: Reuters)

“Even if we get housing starts just sort of bouncing along the bottom for a while, at least that means they won’t be subtracting from GDP growth,” Bill Cheney, chief economist at John Hancock Financial Services, tells Reuters. “At least that’s the end of home building being a negative for the economy, even if it’s not going to turn very positive. This could be the end of the downward trend, but I don’t think it’s likely to be the beginning of an upward trend.”

Still, new building permits — an indicator of builders’ home construction plans — also rose 3 percent to 547,000 units in February from the January rate of 531,000. This was also the first increase since April 2008. In comparison to February last year, last month’s totals were 44.2 percent lower.

Despite being lower than last year’s numbers, analysts see the sudden lift in housing construction and future building plans as encouraging news. “This is an encouraging sign for the U.S. economy,” Matt Esteve of Tempus Consulting tells BBC News. “It is a good signal of what is to come.”

On the day the Census Bureau released the housing result for February, Wall Street rallied as the housing market was at the center of the financial and economic meltdown. “Some measure of stability in the sector is widely seen as crucial to rescuing the economy,” Reuters notes.

Others, however, were more cautious about the increase in housing construction.

“We see no specific factor that might explain this jump,” Ian Shepherdson of High Frequency Economics tells BBC News. “Multi-family starts are always noisy, but this is exceptional. With new home sales still falling and the [recent] months’ supply at a record there is no reason for homebuilding to rise. This is a temporary rebound, not a recovery.”

Resources

New Residential Construction in February 2009
U.S. Census Bureau, March 17, 2009

January 2009 Construction at $986.2 Billion Annual Rate
U.S. Census Bureau, March 2, 2009

U.S. Housing Offers Hope for Economy
by Lucia Mutikani
Reuters, March 17, 2009

U.S. Home Construction Accelerates
BBC News, March 17, 2009