US Housing starts strengthen in 1st quarter

8 May 2012

The March U.S. housing report provided a mixed view of conditions in the residential construction sector, as starts dropped 5.8% from February, but permits rose 4.5%.

The pullback in starts to a seasonally adjusted annual rate of 654,000 units was largely viewed as a correction attributed to business being pulled forward into January and February as a result fo the mild winter. For the first quarter, actual starts totaled 149,600 units, up 19.2% from the same quarter of 2011.

 

The March U.S. housing report provided a mixed view of conditions in the residential construction sector, as starts dropped 5.8% from February, but permits rose 4.5%.

The pullback in starts to a seasonally adjusted annual rate of 654,000 units was largely viewed as a correction attributed to business being pulled forward into January and February as a result fo the mild winter. For the first quarter, actual starts totaled 149,600 units, up 19.2% from the same quarter of 2011.

Movement up or down in the seasonally adjusted annual rate over the past two months has been driven by the multifamily sector, renowned for its volatility. Whilesingle-family starts in March were essentially unchanged from February, the multi-unit sector fell off 16.9%.

The overall decline last month was driven by a 15.9% pullback in the South. All other regions were flat or posted gains.

Some wood product traders, noting that permits data are more important than starts because they are an indication of forward demand, took encouragement from a surge in permitsto a SAAR of 747,000 units. That increase also was driven by the multifamily sector, which accounted for 285,000 units, or 38.2%, of the total.

Permits for single family construction contracted 3.5%. Single-family housing starts, with a few mild upticks, habe largely bounced along a bottom since the U.S. housing market hit its trough in 2009. Multifamily housing has gained as the homeownership rate in the U.S. has dropped.

THe National Association of Home Builders reported that builder confidence in the market for new single family homes declined three notches in April to a reading of 25. Any reading over 50 indicates more builders view conditions as good than poor, and vice versa. But that was the first drop in 7 months.

The NAHB Chief Economist said “this is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also relective of the ongoing challenges that are slowing the housing recovery – particularly tight credit conditions for builers and buyers, competition from foreclosures and problems with obtaining accurate appraisals”