Housing Starts; Building Permits Drop

April 20, 2016

Housing starts and permits both fell in March after a strong February, HUD and the Census Bureau reported yesterday.

The report said privately owned housing starts in March came in at a seasonally adjusted annual rate of 1.09 million, 8.8 percent lower than February’s revised 1.19 million rate. Single-family housing starts fell 9.2 percent to 764,000 from February’s revised 841,000. March’s start rate for units in buildings with five units or more slipped to 325,000 from February’s 341,000.

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said the drop came on the heels of February’s “unseasonably large” 6.9 percent gain. “Weakness was broad based as both single- and multifamily starts reported declines,” he said.

But despite the dip in building activity, on a year-to-date basis, single-family starts remain up 22.2 percent, HUD and Census reported.

“Permits also slipped on the month, falling in line with the pace of starts,” Vitner said. Privately owned housing units authorized by building permits fell 7.7 percent in March to 1.086 million. The permitting figure remained 4.6 percent above the March 2015 figure. Single-family authorizations in March fell to 727,000, which is 1.2 percent below the revised February figure.

Vitner noted that completions rose in March. HUD/Census said privately owned housing completions rose to 1.06 million, up 3.5 percent month-over-month. Single-family completions slipped 0.3 percent to 734,000 but multifamily completions rose from 261,000 in February to 316,000 last month.

“The supply of new homes coming to the market has improved, as the number of homes completed and under construction both reported gains in March,” Vitner said. “This strengthening trend bodes well for new home sales, which have been held back by tight inventories.”

Vitner noted that the housing market seems relatively well positioned heading into the spring home buying season. “We expect housing starts to gain momentum in the year ahead and cap 2016 up 11 percent,” he said.