U.S. home construction fell for a third month in February, but in a hopeful sign, applications for building permits rose to their highest level in four months.
Builders started work on 907,000 homes at a seasonally adjusted annual rate in February, the Commerce Department said Tuesday. That was down a slight 0.2 percent from January, when construction had fallen 11.2 percent. The declines have been blamed in large part on severe winter weather in much of the country.
Applications for permits to build homes, considered a gauge of future activity, rose a solid 7.7 percent in February to 1.02 million units. Many analysts expect housing sales and construction to show further gains this year, helped by a stronger economy.
The weakness in construction came in the apartment sector. Construction of single-family homes rose 0.3 percent in February to an annual rate of 583,000. But this was offset by a 1.2 percent drop in apartment construction, which fell to a rate of 324,000.
By region of the country, construction activity fell a sharp 37.5 percent in the Northeast, a region hit by frigid weather in February. Construction was also down in the West, dropping 5.5 percent.
But activity in the Midwest, which had fallen sharply in January because of bad weather, rebounded 34.5 percent in February. Activity was up 7.3 percent in the South, the region which accounts for more than half of home construction.
The big rise in permit applications pushed activity to the highest level since October's 1.04 million rate, which had been the fastest pace since June 2008.
Housing, while still a long way from the boom of several years ago, has been recovering over the past two years. Residential construction has grown at double-digit rates over the past two years and contributed about one-third of a percentage point to overall economic growth last year.
Many economists predict that sales of both new and existing homes will rise in 2014, lifted by an improving economy and steady job growth. In 2013, housing construction had its best showing since 2007.
Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the homebuilders association.
U.S. homebuilders' confidence in the housing market edged slightly higher in March, reflecting in part improved demand for homes as the spring home-selling season began to ramp up.
But builders said they were continuing to struggle with a shortage of skilled workers, rising building materials costs and a shortage of available land to build new homes.
The National Association of Home Builders/Wells Fargo builder sentiment index released Monday rose to 47. That's up from February's reading of 46. Readings below 50 indicate that more builders view sales conditions as poor rather than good.
The overall index had been above 50 from June through January, reflecting a strengthening housing market.