Housing Starts and Permits Pulled Back in February but Were Still Encouraging Overall

The Census Bureau and the Department of Housing and Urban Development reported that housing starts pulled back in February after notching the fastest pace since August 2007 in January. New residential construction declined 7.0 percent from an annualized 1,329,000 units in January to 1,236,000 units in February. Despite the deceleration in activity, there were some positives to note in the latest report. First, for the fifth straight month, housing starts exceeded 1.2 million units at the annual rate, which suggests that we might finally have breached and sustained that threshold of activity, which is promising. Second, single-family housing starts rose from 877,000 units in January to 902,000 units in February. It was only the second time since September 2007 that single-family construction activity has risen above 900,000 units, following the rate of 946,000 units in November.

The softness in the February housing starts data came from the multifamily segment, which is highly volatile from month to month. Multifamily starts fell sharply from 452,000 units at the annual rate in January to 334,000 units in February, a five-month low.

Meanwhile, housing permits also weakened, down from an annualized 1,377,000 units in January—also the best reading since August 2007—to 1,298,000 units in February. Much like the starts figures, this was the fifth consecutive month with permitting above 1.2 million units, and the trend continues to be a mostly heartening one. With that said, both single-family (down from 877,000 to 872,000) and multifamily (down from 500,000 to 426,000) residential permits decreased in February. On a year-over-year basis, housing permits have risen 6.5 percent, up from 1,219,000 in February 2017, with single-family and multifamily activity up 4.6 percent and 10.6 percent, respectively.

With that in mind, the permits data—while somewhat reduced in February—continue to signal strength in the housing market in the coming months, as this measure is a good proxy for future construction activity. In that way, it mirrored solid assessments from home builders, who remain very upbeat about single-family sales in their outlook.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, 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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