Many economists had expected construction to drop to a pace of around 450,000 units. While housing construction is down a whopping 47.3 percent from a year ago, all parts of the country reported an increase in overall housing construction, except for the West. The increase in starts was led by an 89 percent surge in the Northeast.
Applications for building permits, considered a reliable sign of future activity, also rose in February by 3 percent to an annual rate of 547,000. Economists were expecting permits to fall to a pace of 500,000 units.
“While it may be premature to call an absolute bottom in residential construction, we are clearly getting close,” Adam York, an economist at Wachovia, told the Associated Press.
More than 2 million American homeowners faced foreclosure proceedings last year. That number could reach 10 million in the coming years depending on the severity of the recession, according to a report last month by Credit Suisse, reported the AP.
The Obama administration has announced a $75 billion program to stem skyrocketing home foreclosures, and the Federal Reserve will likely will keep the benchmark interest rate close to zero. Fed policy makers plan to meet Tuesday and Wednesday.
Also Tuesday, the Labor Department reported that wholesale prices edged up a slight 0.1 percent in February as a big drop in food costs offset a second monthly increase in energy prices. The increase was much lower than the 0.8 percent surge in January and smaller than the 0.4 percent increase economists had expected. Compared with a year ago, wholesale prices are actually down 1.3 percent.
On Wednesday, Federal Reserve officials are expected to signal that they will keep a key interest rate at a record low near zero percent for as long as necessary and continue to use other unorthodox means to jump-start the economy.
Meanwhile, the Federal Deposit Insurance Corp approved on Tuesday surcharges for certain bank debt that it guarantees in an attempt to replenish the agency’s deposit insurance fund. It also voted to extend the voluntary debt guarantee program by four months.
The FDIC established the voluntary Temporary Liquidity Guarantee Program in October, providing a government guarantee on certain senior unsecured debt and on banks’ transaction deposit accounts.
The program was created to boost confidence in the banking industry and reduce the risk of bank runs.
“The TLGP has been effective in improving short-term and intermediate-term funding for banking organizations, but liquidity in the financial markets has not returned to pre-crisis levels,” FDIC chair Sheila Bair said in a statement. “The extension will reduce the potential for market disruption when the TLGP ends and should provide a gradual phase-out period as institutions return to reliance on the private, non-guaranteed debt markets.”