Housing starts surge 22% on apartment building
Single-family building permits rise 11% in February
By Rex Nutting, MarketWatch
Last update: 10:10 a.m. EDT March 17, 2009
WASHINGTON (MarketWatch) - Boosted by an 82% increase in construction of apartment buildings, U.S. housing starts surged 22% in February to a seasonally adjusted annual rate of 583,000, the Commerce Department estimated Tuesday.
It was the largest percentage gain in 19 years and was the first increase in eight months in the sector that was at ground zero in the global economic recession. The housing data in winter months are especially volatile because of the weather.
Building permits, which are less volatile than the starts data, rose 3% in February to a 547,000 annual rate. Permits for single-family units rose 11% to a 373,000 rate, the largest percentage gain in 18 years.
"We're inclined to write this off as a weather-related fluke for now," wrote economists for Wrightson ICAP. "If the permits series can hold onto its gains in next month's March report, though, we'll take it as a sign that new construction has finally found a floor (albeit a very low one)."
"We hold to the view that the level of housing construction is becoming so low in absolute terms that starts will bottom out in the months ahead," wrote John Ryding and Conrad DeQuadros of RDQ Economics.
Construction of new housing units had plunged 38% in the previous three months before February's unexpected jump. Economists surveyed by MarketWatch had forecast a further drop to 456,000, despite an expected surge in multifamily construction.
But despite February's gain, housing starts are down 47% from a year ago, and are down 74% from the peak in early 2006. Permits are down 44% in the past year.
Builders are trying to reduce their inventories of unsold homes as they face relentless competition from older homes thrown on the market by foreclosures or short-sales.
"With new home sales still falling and the months' supply at a record there is no reason for homebuilding to rise," wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics.
The mood of home builders' has rarely been worse. The National Association of Home Builders reported Monday that its sentiment index was stuck at 9 on a scale of 1 to 100 in March.
The government cautions that its monthly housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can't be sure whether starts increased or decreased. In February for instance, the standard error for starts was plus or minus 13.8%. Large revisions are common.
It can take four months for a new trend in housing starts to emerge from the data. In the past four months, housing starts have averaged 568,000 annualized, down from 614,000 in the four months ending in January.
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February's housing start rate of 583,000 was the highest since November. January's starts were revised higher to a 477,000 pace, a record low dating back to the 1940s.
Completions of housing units rose 2.3% to a seasonally adjusted annual rate of 785,000. Completions of single-family homes fell 8.2% to a record-low 505,000.
The number of units under construction fell 2.7% to a 762,000 annual rate. Single-family homes under construction dropped 3.4% to 370,000, the lowest in 38 years.
Starts rose 89% in the Northeast, rose 58% in the Midwest, rose 30% in the South and fell 25% in the West.
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