Jump in building permits may signal a housing turnaround

PVC pipes lay in front of new single-family homes being built in Santa Clarita, Calif. Housing permits rose 5.1 percent in February, the Census Bureau reported, raising builders' hopes for a healthy spring buying season. DAMIAN DOVARGANES / Associated Press

In another encouraging sign that the housing market might be ready to see better days, housing permits rose 5.1 percent in February to their highest level since October 2008, the Census Bureau reported Tuesday.

What's more, permits for single-family house construction, the key to any recovery of the new-home market, rose 4.9 percent in February from January, the bureau reported.

That was the best number since April 2010, the final month of the federal tax-credit incentive designed to boost stagnant home sales in both the existing and new-home markets.

Once the incentive ended, sales and prices in both markets resumed their precipitous decline. In the last few months, however, price declines have slowed measurably and sales have shown some gains in many markets.

Multifamily permits - for apartments - continued to climb as buyers falling into the age group that normally would be purchasing their first homes continue to rent.

Housing starts, which most economists consider too influenced by weather to be of statistical value, fell 1.1 percent month to month, the bureau said.

"We believe that January's exceptionally good weather was a factor in pulling some single-family starts activity forward that might otherwise have occurred in February," said National Association of Home Builders chief economist David Crowe.

Economist Patrick Newport of IHS Global Insight in Lexington, Mass., agreed with Crowe, saying that mild weather in both months pushed up starts, but that January's figure was just a little bit better than February's.

The builder association's chairman, Barry Rutenberg, said that although his members expected demand to improve in coming months, they continue to "exercise caution regarding new projects until that interest translates into more signed sales contracts."

Newport considers this report to be one of the more encouraging new-construction reports seen in the last four years.

"Still, as the Fed reminded us last Tuesday, 'the housing sector remains depressed,'?" Newport said.

Nevertheless, 2012 should be a better year for housing than 2011, he added, as pent-up demand is building and will revive activity at some point.

IHS Global Insight is predicting that housing starts will increase to 745,000 this year from 611,000 in 2011.

That is about 25 percent of their peak in January 2006 - a seasonally adjusted 2.7 million units.

Contact Alan J. Heavens at 215-854-2472 or aheavens@philly.com, or follow on Twitter @alheavens.