Housing surge misses West

Housing surge misses West
Still, Wasatch Front builders are optimistic fed, state incentives may spark turnaround.

Staff And News Services, Salt Lake Tribune
Updated:03/18/2009 08:06:42 AM MDT

Housing construction posted a surprisingly large increase in February, bolstered by strength in all parts of the country except Western states such as Utah.

But even along the Wasatch Front, builders and others in the industry are optimistic that a host of federal and state incentives for buyers could help turn things around.

The Commerce Department reported Tuesday that construction of new homes and apartments nationally jumped 22.2 percent in February, compared with January, pushing total activity to a seasonally adjusted annual rate of 583,000 units.

Investors restarted Wall Street's rally Tuesday on the news, buying financial and homebuilder stocks. Major market indicators jumped more than 2 percent, including the Dow Jones industrial average, which added 179 points. Markets have risen five out of the past six sessions.

Although the surge in housing construction was far better than the continued decline economists had expected, the rebound could be a temporary gain given all the problems the housing industry still faces.

Even with the big increase, construction activity remains 47.3 percent below where it was a year ago. The strength in February was led by a big increase in apartment construction nationally, which can be highly volatile from month to month.

All areas of the country reported an increase last month, except the West, parts of which have been hard hit by the housing slump.

Along the Wasatch Front, builders in February took out permits for the construction of 133 homes, down from 150 in January and 270 in February 2008.

Builders here are hoping a federal tax incentive of as much as $8,000 geared toward first-time homebuyers, and a state grant of $6,000 for those who buy new homes, will help Utah's new-home market.

On the multifamily side, construction of apartments has not dried up along the Wasatch Front as it has in Denver, Phoenix and Las Vegas. That said, the local market is weakening, according to Jed Millburn of ARA Utah, which tracks the multifamily market.

Vacancies are up and the hefty rental increases of the past several years have given way to no increases at all, which makes developers -- even those who can get financing -- not as eager to build complexes, though some are rising in the valley.

The uptick in construction nationally was driven by improving weather in February, particularly in the Northeast, where a severe winter had slowed construction in December and January to a standstill, said Patrick Newport, U.S. economist for IHS Global Insight.

"The numbers are so low that any increase will give you a big percentage increase," Newport said, adding that a surer sign of a turnaround would be a three-month sustained increase in single-family permits.