WASHINGTON (AP) _ Construction of new homes and apartments rose by a solid 5 percent in December to cap the best year for housing construction since 1986, the government reported Tuesday.
The Commerce Department said that builders broke ground on 1.84 million new home homes and apartments at a seasonally adjusted annual rate in December compared to a 1.75 million unit pace in November, when activity had risen by 5.2 percent from the October level.
For the year as a whole, work was started on 1.70 million homes and apartments, up 6.4 percent from 2001 and the best year for home builders since 1986.
All the activity was bolstered by the lowest mortgage rates since the early 1960s, which fueled a boom in housing construction and sales.
Housing was one of the few bright spots for the economy last year as the country endured an uncertain recovery from the 2001 recession. The unemployment rate at year's end stood at an eight-year high of 6 percent and many analysts believe it will go higher in coming months as concerns about what a possible war in Iraq will do to oil supplies continue to weigh on the U.S. economy.
The Federal Reserve, trying to bolster consumer demand, has pushed a key interest rate to a 41-year low. Mortgage rates have tracked the Fed's efforts with 30-year mortgages dropping to the lowest levels since the early 1960s.
The mortgage rate last week, according to a survey by Freddie Mac, was 5.97 percent, up slightly from the four-decade low of 5.85 percent set at the beginning of this year. Analysts believe that rates will move slightly higher for this year and for that reason they are predicting that sales of both new and existing homes, which are expected to set records for 2002, will dip slightly in 2003.
The report on housing starts showed that builders began construction at a seasonally adjusted annual rate on 1.47 million single-family homes in December, up 4.9 percent from the November pace. This was the best monthly building pace for single-family homes since November 1978.
The pace of apartment construction rose by 3.9 percent in December, compared to November, to a seasonally adjusted annual rate of 321,000 units, the strongest pace since last August.
By region, housing construction was up in all areas, led by an 18.2 percent jump in activity in the Northeast, where construction climbed to an annual rate of 169,000 units.
Construction of homes and apartments was up 9.7 percent in the West to an annual rate of 471,000 units. The Midwest saw an increase of 4 percent to an annual rate of 390,000 units in December while the South recorded the smallest gain in construction activity in December, an increase of 0.6 percent, which pushed building activity to an annual rate of 805,000 units.
For the year as a whole, construction activity on 1.70 million new homes and apartments compared to 1.60 million in 2001 and was the best showing since 1.81 million homes and apartments were built in 1986.