Housing Starts Reverse Winter Slump

Census and HUD reported March housing starts were up 2.8% from an upwardly revised February. Single-family starts accounted for all of the increase, rising 6% to 635,000 on a seasonally-adjusted annual basis. The increase was particularly strong in the hardest hit northern US of the Northeast and Midwest regions where single-family starts increased 39% and 29% respectively.

Housing permits dropped 2.4% virtually all in the multifamily apartment sector. Multifamily permits (in buildings with 2 or more units) were 398,000 (on a seasonally-adjusted annual basis), about the same as the fourth quarter of 2013. February was unusually high at 425,000 so the fall in March was an adjustment to an unsustainable level than a reversal in apartment construction.

The modest recovery in single-family construction after an unusual winter reflects builders continued caution as the overall economic expansion moves slowly forward. Housing conditions are right for continued growth in housing construction and sales. But consumers’ economic condition and expectations remain uncertain enough that committing to a large and long-lasting purchase like a home remains tentative. Builders, consequently, are reflecting that same caution.

In an April survey, the leading reason builders gave for consumer hesitancy was buyers worried about their employment and economic situation at 47% of all builders. The share is down from over 70% in 2009. The second leading reason for consumer hesitancy is that the prospective buyer cannot sell their existing home, also down significantly from over 80% in 2009 but still high. These top reasons are somewhat circular in that the likely reason current home owners feel they will have trouble selling their home is their prospective buyer is uncertain about their economic future.

Hence, as the employment market continues to improve (NAHB forecasts 1.6% increase this year) and consumer confidence continues to improve, these hesitancies will dissipate and housing sales and construction will move forward at a modest pace. NAHB expects a 17% increase in construction in 2014.

Housing Starts



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