Home Construction Rebounds

Housing starts increased 7.2% in March after recovering from near historic lows in February.  The improvement was broad based in single-family, multifamily and nearly all building types within the four regions reported.  The previous record low for permits in February was revised upward, which erased that record and moved the all-time permit low back to March 2009.

Single family starts increased 7.7% from an upwardly revised February level and increased in every region. Single-family permits also increased 5.7% and every region showed improvement. Multifamily (2+) starts improved 5.8% and permits improved by 25%.

Builders did slow completions to the lowest level on record going back to 1968.  Poor weather in January and February may have slowed completions as well as builders are holing off on interior finishes until a contract is signed and the buyer chooses options.

The wide-spread improvement comes off of extremely low activity levels. While these are welcome signs that the housing recovery is still possible, the low absolute levels remain far off underlying demographic need.  The first quarter averages remain below 600,000 for starts and permits and barely over 400,000 for single family homes.  Until consumers are convinced that the economic recovery is solidly at hand, they will be reluctant to engage in a purchase as significant as a new home.  The excess inventory of existing homes in some of the worst markets will also act as a retardant to full recovery even in those places with little excess.  Just as the price declines in a few states infected demand in virtually every state, so also some indication of improvement in many places will be necessary for consensus to improve everywhere.

The increases in March do support NAHB’s expectation that 2011 will see a very gradual improvement in housing activity that will build throughout the year.  The singular caveat to this forecast is availability of credit.  If banks and regulators continue their unreasonably tight lending practices to builders in improving markets, then the housing recovery cannot go forward.



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