The Census Bureau and the U.S. Department of Housing and Urban Development said that housing starts plummeted in February, falling from a revised 1,048,000 in December to 880,000 in January. Both of these figures are at annual, seasonally adjusted rates. (The December figure was originally reported to be 999,000.) Housing starts had been expected to decline to around 950,000, so the news that it decreased 16.0 percent for the month was larger than anticipated. It followed word yesterday that home builder sentiment was also off sharply, and in both cases, poor weather conditions more than likely hampered the ability of starting new residential construction sites.
The decline in housing starts in February occurred for both single-family (down from 681,000 to 573,000) and multi-family (down from 367,000 to 307,000) units. Essentially, the decreases wiped out the rebound that we have seen in the sector since autumn.
On the positive side, housing permits fell less sharply, particularly for single-family homes. Permitting for single-family residential units were off from 610,000 in December to 602,000 in January. The fact that these figures were down only marginally suggests that weather was one of the larger factors in the housing starts decline, with permits reflecting the intent to start at some point in the future. Still, while these data reflect a general rebound in the past couple years, single-family permitting was up just 2.4 percent year-over-year.
Meanwhile, multi-family housing permits fell more significantly for the month, down from 381,000 to 335,000. This component has been highly volatile over the past year, ranging from a low of 291,000 in March to a high of 418,000 in October. On a year-over-year basis, multi-family permitting edged up 2.4 percent, as well, with the growth in homes with 5 or more units.
Overall, we remain optimistic that housing will continue to rebound in 2014, with housing starts approaching 1.1 million by year’s end. To the extent that weather reduced the ability of contractors to start building new homes, the data should start to improve in February and March.
Chad Moutray is the chief economist, National Association of Manufacturers.
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