Interest Rate Roundup

Thursday, April 16, 2009

Housing starts drop 10.8% in March

We just got the latest figures on home construction. Here's what they showed ...

* Total housing starts dropped 10.8% to a seasonally adjusted annual rate of 510,000 from a downwardly revised 572,000 in February. Building permits dropped 9% to a fresh all-time low of 513,000 from an upwardly revised 564,000. Economists were expecting 540,000 starts and 549,000 permits.

* By property type, single family starts were flat, while multifamily starts dropped 29%. Single family permits dropped 7.4%, while multifamily permits fell 12.6%.

* Regionally speaking, it was a mixed bag. Starts rose 6.3% in the Northeast and 15.9% in the Midwest. But they fell 16.8% in the South and 26.3% in the West. The regional breakdown of building permits was grimmer. Permit activity was flat in the West, but down 2.3% in the Midwest, down 10.3% in the South, and down 24.3% in the Northeast.

The volatility in the construction figures continues. We had a huge surge in starts in February, driven by a large gain in multifamily activity. Now, we're seeing some give back in March, again driven by multifamily.

When you sort through the monthly noise, however, the bigger-picture trends become clearer. Tighter funding conditions for construction projects, the large overhang of housing inventory, and the broad economic weakness we're seeing are all conspiring to dampen building activity. Any future recovery will come in fits and starts, and will take time. Nothing in the latest data -- especially the weak permitting figures -- suggests an imminent rebound.


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