Interest Rate Roundup

Tuesday, March 17, 2009

Housing starts pop 22.2% in February

Well that certainly was an interesting number -- housing starts surged in February. More details ...

* Total housing starts surged 22.2% to a seasonally adjusted annual rate of 583,000, up from 477,000 in January. Building permits rose 3% to 547,000 from 531,000. Economists were expecting 450,000 starts and 500,000 permits.

* By property type, single family starts inched up 1.1% from January, while multifamily starts soared 82.3%. Single family permits rose 11%, while multifamily permits dropped 10.8%.

* Regionally speaking, starts rose in three out of four regions -- up 30.2% in the South, 58.5% in the Midwest, and 88.6% in the Northeast. Starts dropped 24.1% in the West. Building permits rose 5.9% in the South and 27.6% in the Northeast. Permit issuance was unchanged in the Midwest and down 13.6% in the West.

After looking at the latest construction and permitting figures, you have to ask yourself whether this is a case of "Been down so long, it looks like up to me?" Or is this update more of a weather report than an economic report? In other words, did a warmer-than-usual February distort the seasonal adjustments, prompting more building activity to show up in the numbers than you would expect?

February temperatures were 2.3 degrees above the average for the 20th century, according to the National Climactic Data Center; A nifty map available here shows how much warmer than average most parts of the U.S. were last month. More trivia: It was the 8th driest February in 114 years of record keeping.

It's tough to say, frankly. You could argue that starts have fallen so low, and that the raw supply of new homes for sale has fallen sharply enough (at 342,000 in January, it's the lowest going back to July 2003), that builders now have an incentive to put their shovels and hammers back to work again.

There's just one problem: Demand for new homes remains downright anemic. Sales dropped to an annual rate of just 309,000 in January, the lowest level in the 46 years the government has been keeping track. The March NAHB figures suggest the spring buying season is off to a lousy start, too. I wouldn't get too excited about this uptick in construction unless and until we see further, consistent increases in the months ahead.


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