Interest Rate Roundup

Friday, April 16, 2010

Housing starts climb to 16-month high in March

We just got the latest look at housing starts and building permits for the month of March. Here's a recap:

* Housing starts rose 1.6% to a seasonally adjusted annual rate of 626,000 from an upwardly revised 616,000 in February. That was ahead of the average forecast of 610,000 units and it leaves starts at the highest level since November 2008. Building permits jumped 7.5% to 685,000 from an upwardly revised 637,000. That was well ahead of the 625,000-unit forecast of analysts and the highest in 17 months.

* By property type, single family starts fell 0.9%, the first decline since December. The volatile multifamily starts series surged 18.8%. The permits breakdown looked pretty good, with single family permits up 5.6% and multi-family permits rising 15.4%.

* By region, starts plunged 28.4% in the Midwest and dropped 8.3% in the Northeast. They dipped 2.1% in the West, but surged 18.2% in the South. Strength in the South is good to see because it's the country's biggest home building region. Permits dropped 6.7% in the West and 19.5% in the Northeast. They jumped 17.6% in the Midwest and rose 18.4% in the South.

Last May, I said that it appeared three of the four legs of the housing stool were stabilizing. I suggested sales rates were bottoming, inventory levels were peaking, and construction activity was finding a floor. Pricing would likely dip a bit further, but not by a major amount.

The latest report on starts and permits fits with that "anemic recovery" scenario. Specifically, starts rose to their highest level since November 2008 while permits rose to their highest since October 2008. Starts were skewed higher by the volatile multifamily category. But permit activity was strong in both the single- and multi-family sides of the business.

With new home inventories running at their lowest level since 1971, it's not surprising that builders are starting to swing their hammers again. We won't see a vigorous rebound due to the overhang of distressed, "used" homes. But it will be a gradual recovery nonetheless -- welcome news when you consider starts plunged 79% from their 2006 high through April 2009.


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