This Housing Gauge Fails to Build Confidence
The quality and longevity of the housing recovery remains questionable. Against the backdrop of a sluggish economy and affordability issues, housing starts in the United States fell below expectations once again last month.
According to the U.S. Department of Commerce, builders broke ground on houses at a seasonally adjusted annual rate of 946,000 units in March, up 2.8 percent from the revised February estimate of 920,000 units, but still 5.9 percent below the March 2013 rate of 1,005,000 units. On the positive, housing starts have improved on a month-over-month basis for three consecutive months.
The results for March were worse than expected, which has been a common theme over the past year. On average, economists expected housing starts to come in around a 973,000-unit pace last month. The January reading for housing starts posted the biggest miss of expectations in seven months.
The cold weather has received much of the blame for poor economic reports this year, but that factor has now faded as we enter spring. Housing starts in the Northeast jumped 30.7 percent in March from a month earlier. Housing starts in the Midwest surged 65.5 percent last month. Meanwhile, the South and West posted declines of 9.1 percent and 4.5 percent, respectively.
New building permits, an indication of future demand, fell 2.2 percent from February to a seasonally adjusted annual rate of 990,000 units. However, the results were worse than they appear. With the exception of February, building permits for single-family homes in March actually dropped to their lowest level in over a year, while multi-family permits for five or more units declined 8 percent on a monthly basis.
Currently, the rate of housing starts is mostly in line with last year’s pace. Construction began on 926,700 homes in 2013, a significant increase from 780,000 units in the prior year, but still below the historic average of 1.5 million new homes per year since 1959. Housing starts peaked at 2.27 million units in early 2006, while the pace of home construction reached its low point in 2009, at below 500,000 units.
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