The Census Bureau and the U.S. Department of Housing and Urban Development reported that housing starts fell from 694,000 in February to 654,000 in March. This is the second consecutive monthly decline (with January’s new residential construction figure revised up to 714,000), and it was much steeper than anticipated. On the other hand, housing permits – a sign of future activity – jumped from 715,000 to 747,000, mainly on strength among multi-family residential units. Housing completions also rose, up from 576,000 to 600,000.
The decline in March housing starts, though, stemmed almost entirely from a decline in new multi-family residential construction. Regionally, the largest gains in housing starts in March were found in the Northeast; while the South saw declines.
Multi-family housing starts dropped from 231,000 to 192,000, with single-family starts down by just 1,000 units. Hopefully, the increase in permitting bodes well for future activity in the multi-family sector, which tends to be more volatile in general but has been the stronger component in past months.
It is important to point out that housing starts – even with this month’s decline – continue their slow trend upward. New residential construction is up 61,000 units at the annual rate over their level of March 2011, and forecasts for future activity remain mostly positive.
Somewhat mirroring these results, the National Association of Home Builders (NAHB) and Wells Fargo observed a decline in builder optimism. The Housing Market Index declined from 28 in April to 25 in March. Improved confidence in the Northeast was outweighed by reduced sentiment in the South and West. It continues to be an improvement from the mindset last autumn when the index measured 14 in September.
“What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September,” said NAHB Chief Economist David Crowe. “This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery – particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals.”
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