Housing Starts, with Revisions, Looking More Solid

Housing starts, buoyed by positive revisions from earlier months and a burst of multifamily activity, posted a nearly 2 percent gain in March, HUD and the Census Bureau reported yesterday.

The report said privately owned housing starts in March rose to a seasonally adjusted annual rate of 1.319 million in March, 1.9 percent higher than February’s revised estimate of 1.295 million and nearly 11 percent higher than a year ago (1.189 million). Single-family housing starts in March fell by 3.7 percent to 867,000 from February’s revised 900,000. The March rate for units in buildings with five units or more jumped to 439,000, up by more than 16 percent from February (378,000) and nearly 24 percent higher than a year ago.

Interestingly, gains in the smallest regions (Northeast and Midwest) more than offset modest declines in the more populous South and West regions.

In the Northeast, starts rose by 0.8 percent in March to 132,000 units, seasonally adjusted, from 131,000 units in February and improved by nearly 14 percent from a year ago. In the Midwest, starts jumped by 22.4 percent to 180,000 units in March from 147,000 in February and improved by nearly 30 percent from a year ago.

In the South, starts fell by 0.6 percent in March, seasonally adjusted, to 621,000 units in March from 625,000 units in February and declined by nearly 2 percent from a year ago. In the West, starts fell by 1.5 percent in March to 386,000 units from 392,000 in February but improved by 28.2 percent from a year ago.

“Despite the dip in single-family starts, the data for the first three months of the year are unambiguously positive and indicate that new home construction has more momentum than previous reports had indicated,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Data for February were revised up significantly and now show starts falling less than half as much as the preliminary figures indicated.”

Vitner noted preliminary data for the early part of the year are “notoriously volatile,” and that volatility can be heightened by swings in the weather. “Early data from this seasonally slow time of the year are often incomplete, which appears to have been the case this year,” he said.

The report said privately owned housing units authorized by building permits in March came in at a seasonally adjusted annual rate of 1.345 million, 2.5 percent above the revised February rate of 1.321 million and 7.5 percent higher than a year ag. Single-family authorizations in March fell by 5.5 percent to 840,000. Authorizations of units in buildings with five units or more jumped to 473,000 in March, up by nearly 23 percent from February and by 19.1 percent from a year ago.

Privately owned housing completions in March came in at a seasonally adjusted annual rate of 1.217 million, 5.1 percent below the revised February estimate of 1.281 million, but is 1.9 percent higher than a year ago. Single-family housing completions in March fell to 840,000; 4.7 percent below the revised February rate of 881,000. The March rate for units in buildings with five units or more was 371,000, down by nearly 6 percent from February but up by 0.8 percent from a year ago.

“Two important trends signal that some modest relief for the housing supply shortage is on the way–the continued year-over-year growth in completions means more homes on the market in the short-term and the dramatic rise in construction employment this month indicates housing construction is likely to increase in the months ahead,” said Mark Fleming, chief economist with First American Financial Corp., Santa Ana, Calif. “It’s no secret that the limited supply of homes for sale is the biggest issue facing the housing market today. From a short-term perspective, this month’s overall pace of housing starts, 1.32 million units, may modestly alleviate the supply shortage.”

Fleming said the continued year-over-year growth in completions “means more homes on the market in the short-term and the dramatic rise in construction employment this month indicates housing construction is likely to increase in the months ahead. Residential construction employment is easing as a headwind to future housing starts.”