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Weather weakens housing

Unusually cool, wet weather in the South and West drove housing starts down 4 percent during February. But helped by continued low mortgage rates, sales of both new and existing homes posted gains, recouping some of January's deep declines.

Hit hard by unseasonably damp weather, housing starts slipped for a second straight month, to a seasonally adjusted level of 1.9 million units, the Commerce Department reported, weakening further following an even steeper drop of 6.3 percent the prior month.

"Builders continued to adjust their new production to a more sustainable level after the surge of late 2003," said Bobby Rayburn, president of the National Association of Home Builders. The pace of single-family housing starts declined by 4.1 percent, while multi-family housing starts slipped by 3.4 percent.

Winning back some of January's deep declines, housing sales improved during the month. Sales of existing homes, by far the largest slice of the housing pie, rose by 2 percent, following a revised decline of 5.8 percent in January, the National Association of Realtors reported.

Highly volatile new home sales, subject to wide swings and frequent revisions, jumped 5.8 percent, erasing a January drop of 1.1 percent.

Even with the February gain, the broad market for existing homes could have hit the wall, even in a low interest rate environment.

"Currently, we are projecting that home sales will decline slightly, but they remain at exceptionally high levels," said David Lereah, chief economist of the National Association of Realtors.

Housing by region
Month-to-month % change

Existing home sales Housing starts New home sales
Northeast 14.3% 25.3% 12.0%
Midwest 7.6 7.1 -10.6
South -4.2 -10.6 -1.2
West 3.1 -7.5 28.5
Source: U.S. Department of Commerce and National Association of Realtors

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