Housing starts edged down in February, but economists found optimism in the new construction data as permits increased. (William Thomas Cain / Getty Images)

March 20, 2012, 11:50 a.m.

Economists brushed off a decline in new residential construction starts last month and instead looked at an increase in permits issued for houses and apartment buildings as a positive indicator that the real estate market is on the mend.

Housing starts fell 1.1% from the prior month to hit a seasonally adjusted annual rate of 698,000, the Commerce Department reported. That was a 34.7% surge from February last year.

Starts were down 5.9% from the prior month in the West and 12.3% in the Northeast. They were up 1.5% in the South and 3.0% in the Midwest.

Building permits told a different story, up 5.1% above the revised January rate and 34.3% above February last year. Economists looked at the increase in permits as a sign that the economy was improving.

In a note, economist Patrick Newport of IHS Global Insight said, This report is one of the more encouraging new construction reports we have seen in the last four years.

He said apartment building is picking up across the U.S., and that home-building was on the rise in the South, which accounts for about half of single-family home construction. Even while starts were down last month, they were at their third-highest level since October 2008, he noted.

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Economists optimistic on new construction numbers

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