New home construction dips, but rebound expected

(CBS/AP) WASHINGTON - U.S. builders started work on slightly fewer homes in February, but they began preparing for what could be the healthiest spring buying season since the housing bubble burst.

The Commerce Department says builders broke ground on a seasonally adjusted annual rate of 698,000 homes last month. That's down 1.1 percent from January.

But the government revised up its figures from January. And building permits, a gauge of future construction, jumped 5.1 percent last month to the highest level in more than a year.

Construction of single-family homes, which makes up roughly 70 percent of housing starts, dipped in February to 457,000 after rising for four straight months to an 18-month high. A jump in volatile apartment construction offset the decline.

VIDEO: Home sales expected to rise
US homebuilder outlook near 4-year high

It can take 12 months for a builder to obtain a permit and construct a single-family home.

A mild winter allowed builders to keep working in most parts of the country. And an improving job market has many slightly more optimistic about home sales this year.

The housing market still has a long way to go before a full recovery is under way. The current pace of construction is barely half the rate considered healthy. Most analysts say it could be years before the industry returns to full health.

Yet builders are starting to see some signs of progress. A measure of builder sentiment has risen for five out of the past six months and is now at its highest level in nearly five years. Many builders are seeing more people express interest in buying a home, leading them to believe 2012 could be a turn-around year for the market. Mortgage rates are hovering near record lows below 4 percent. And home sales started to rise at the end of last year.

Though new homes represent just 20 percent of the overall home market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

There are some hurdles to a smooth recovery: Builders are struggling to compete with deeply discounted foreclosures and short sales -- when lenders allow homes to be sold for less than what's owed on the mortgage.

After previous recessions, housing accounted for at least 15 percent of U.S. economic growth. Since the recession officially ended in June 2009, it has contributed just 4 percent.

Another reason sales have fallen is that previously occupied homes have become a better deal than new homes. The median price of a new home is about 30 percent higher than the median price for a re-sale. That's nearly twice the markup typical in a healthy housing market.