U.S.

Housing Market Still Strong

By CBSNews.com staff CBSNews.com staff

November 17, 2000 / 11:47 AM EST / CBS MarketWatch

The housing market remained robust in February, defying predictions that the economy has slipped into recession.

Builders started work on new homes at a 1.647 million annual pace in February, the Commerce Department said Friday, statistically unchanged from January's upwardly revised rate of 1.653 million.

Economists were expecting a 1.60 million pace, according to a survey conducted by CBS.MarketWatch.com.

In a separate report, the Labor Department said the producer price index rose 0.1 percent in February, with core inflation falling 0.3 percent. Inflation at the wholesale level had jumped 1.1 percent in January on higher natural gas prices, but reverted to a tamer trend in February.

Starts of single-family homes dropped two percent to a 1.32 million pace. New construction on apartment buildings rose 8 percent to 332,000 despite a nearly 50 percent drop in construction of buildings with 4 or fewer units.

Building permits, which indicate future building activity, fell 3 percent to a still-strong 1.67 million pace in February from a one-year high of 1.72 million in January.

The housing market has been the one bright light of the U.S. economy. It's benefited from falling mortgage rates and strong job growth. Housing activity has also supported strong sales of furniture and building materials.

The data will disappoint the stock market. Investors want either very weak data that will spur the Federal Reserve to slash interest rates aggressively or very strong data that would indicate a return to a healthy economy and strong earnings.

Still, the total mix of data (including the perilous plunge of Wall Street's major indexes) argue for a strong response from the Fed. Analysts expect at least a half percentage point cut in the Fed funds rate to 5 percent at Tuesday's meeting of the Federal Open Market Committee. Expectations for a 75-basis-point cut are rising.