Home Building Surges in West, Cools in East : Construction: March increase in California is a surprise, sparks hope that market is breaking out of slump.

New home construction in California and the rest of the Western United States surged nearly 18% in March from February, the government said Tuesday, but a huge drop in the weather-battered East pulled down construction activity nationwide by 4.6%.

New homes began at a seasonally adjusted annual rate of 296,000 units in the West last month, up from February’s 251,000-unit rate and well ahead of January’s rain-soaked 219,000-unit pace, according to the Commerce Department.

The size of the February-to-March increase surprised even bullish developers and sparked hopes that the new home market in California will regain its footing after a three-year slump. Low interest rates, stable prices and pent-up demand “are outweighing fears about the future of Southern California’s economy,” said Jim Guthrie of Charter Pacific Group, which recently sold 10 of the remaining 12 homes in a Ventura housing tract where the homes range in price from $199,000 to $235,000.

Still, some analysts remained cautious and noted that activity in the West in March was 9.2% below year-earlier levels.

“And a year ago wasn’t that good by historical standards,” said researcher John Karevoll of Dataquick Information Systems, a La Jolla-based firm that tracks housing construction and sales. “The worst of the housing slump is behind us, but we might drag along near the bottom for a while.”

Nationwide, starts began at a 1.13-million rate in March--down 4.6% from February and off 14% from a year earlier.

The March declines were blamed on the “Blizzard of ‘93,” which battered the East with the worst snowstorms in a century. Builders were forced to spend several days indoors, then spent another week or two clearing snow and debris from their housing tracts and waiting for the ground to thaw.

“Anytime you get that kind of storm, housing starts are going to get thrown for a loop,” said Michael Carliner, an economist with the National Assn. of Home Builders in Washington.

Carliner and officials at some Southern California-based home-building companies said much of the March pickup in the West stemmed from an improving “move-up” market--homes for people selling their current dwellings and buying more expensive ones.

Although communities with less-expensive homes built for first-time buyers have fared rather well in recent years, construction of move-up homes--generally considered homes worth at least $200,000--had ground to a virtual halt.

“The move-up market seems to be picking up because people can finally sell their home and buy a better one,” said Frank Foster, regional manager for Newport Beach-based home builder Fieldstone Co. “Lower rates are also letting them stretch their buying power.”

Housing Starts Seasonally adjusted annual rate, millions of units

March, ‘93: 1.13

Feb. ‘93: 1.19

March, ‘92: 1.32 Source: Commerce Department