Housing Starts Fall, But Longer-Term Trend Remains Positive

By March 20, 2012Economy

The Census Bureau and the U.S. Department of Housing and Urban Development reported that housing starts fell from 706,000 in January to 698,000 residential units in February. Note that January’s figure was revised up from the original estimate of 699,000, essentially keeping the number of housing starts around 700,000 annually.

The decline in February housing starts stemmed entirely from a drop in single-family units (down to 457,000 from 507,000), with multi-unit housing construction higher (up to 241,000 from 199,000). Still, the longer-term trend remains positive, with slow growth in this indicator over the past year; housing starts, for instance, were 518,000 in February 2011.

One definite positive in these figures was the increase in housing permits – a sign of higher future residential construction. Housing permits grew from 682,000 to 717,000, its highest level since October 2008. Both single-family and multi-family unit permits grew for the month.

The news on housing completions was mixed. While the number of completed residential housing units rose from 535,000 to 568,000, this is well-below the 611,000 reported last year at this time.

Overall, these numbers suggest an easing of home construction in February. Housing starts had been expected to rise modestly. Nonetheless, residential building remains on a slow-moving ascent when you look at the longer trend, and strong housing permit numbers bode well for future activity.

Yesterday, the National Association of Home Builders (NAHB) and Wells Fargo released data that was equally mixed. Their Housing Market Index remained unchanged at 28, but that remains significantly higher than the 14 that was reported in September, just six months ago. Builders are also suggesting higher sales in the next six months. Regionally, each region observed an increase except for the West.

Despite the uptick in activity over the past few months, NAHB Chief Economist David Crowe tried to put things in perspective, as many builders remain cautious. “… many of our members continue to cite obstacles on the road to recovery, including persistently tight builder and buyer credit and the ongoing inventory of distressed properties in some markets.”

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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