Housing starts, a hallmark measure of housing activity, fell 22.5% in February to the second lowest level in a series that goes back to 1959. The collapse was broad based with single-family starts falling 11.8% and multifamily falling 46.1% from an unusually high January level. The declines were exacerbated by upward revisions to both single- and multifamily estimates in January and by unusually bad weather in February across some regions of the country.
Weather and unusual monthly patterns did not appear to be a cause behind the decline in housing permits, which recorded their lowest rate ever of 517,000 units on a seasonally-adjusted annual basis. The permit decline was consistent across regions and building types.
The sharp decline, while aggravated by weather and re-adjustment from January’s highs, was due to consumer and builder uncertainty in the midst of an already fragile housing recovery. Consumers were hit with new uncertainties about the pace of foreclosures as the administration and Congress argue over federal programs, new uncertainties about credit availability, and uncertainty about oil prices and their trickle effect into the costs of other products.
The economic recovery has been fragile and the housing sector has been one of the most volatile because of the over-supply of existing homes, the under-demand from potential new households and sharp reductions in credit for both buyers and builders. Consequently, any new and negative news moves consumers and builders backward in their confidence to go forward with a major purchase or even in signing a lease on an apartment.
Improvement in housing requires consistent positive economic news as well as signals from Washington that housing will not be the victim of overzealous regulation or legislation to bolster consumer confidence.