Feb. Housing Starts End a Five-Month Trend

• Housing starts in February fell 17 percent from January and 3 percent from a year ago, to a seasonally adjusted annual rate of 897,000.
• The decline reversed a trend of five straight months of housing starts exceeding 1 million (SAAR).

All good things inevitably end, and this morning’s housing starts data proved that point again. Going forward, it will be important to note if this morning’s data is the start of a new trend, or just a bump in the road.

Over the past few months, we have seen encouraging signs of a slow recovery in new housing construction, recording five straight months of more than 1 million new housing starts at a seasonally adjusted annual rate (SAAR). So of course, housing starts plunged 17 percent in February from January, and 3.3 percent from a year ago, to 897,000 (SAAR).

The fall in started units hit both the single-family and multi-family sectors (down 14.9 percent and 21.6 percent, respectively). Most of the decline in housing starts was concentrated in the Northeast and Midwest, with starts in the Northeast declining an extraordinary 56.5 percent. This suggests at least some of the decline might be attributable to weather-related factors. In the West and South, where the weather has been milder, housing starts fell 18.2 percent and 2.5 percent, respectively.

For those looking for a sliver lining, permits issued for new construction nationwide in February rose 3 percent from January to more than 1.09 million (SAAR).

Hopefully, February’s data represents only a temporary blip on the radar as the housing market continues to make progress towards more normal construction levels and inventory. But even prior to this month’s setback, we still have a long way to go before getting to those historical levels. From 1985 to 2000, housing starts averaged more than 1.43 million (SAAR), over 50 percent above current levels.