Housing permits dropped 5.5% in February to 1.46 million from the prior month and housing starts fell 1.5% month-to-month, according to the U.S. Census Bureau.
The Census states that housing starts are still 13.8% above the February 20109 rate of 1.28 million. Housing starts are 39.2% above last year’s rate of 1.14 million.
Housing completions fell slightly from the prior, as the Census reported a 0.2% drop in February to 1.316 million. Completions are up 1.2% from the February 2019 rate of 1.33 million.
First American’s Deputy Chief Economist Odeta Kushi said the year-over-year gains are “in our rearview mirror” as the impact of COVID-19 on consumer confidence and future home building remains to be seen.
“The most recent homebuilder confidence report, while still upbeat, is beginning to indicate early signs of Coronavirus-driven headwinds to the construction industry, particularly concerns around supply-side disruptions and future demand,” she said.
Kushi added, “The fundamentals, which drive new home sales remain—near record-low mortgage rates, a limited supply of existing homes for sale, and sturdy demand driven by millennials—a generation that is aging into the key lifestyle decisions which drive homeownership demand.”
Realtor.com’s Senior Economist George Ratiu said the most recent construction data does not account for the “dramatic shift” in the nation since the spread of the virus, remote work policies, travel, event cancellations, and monetary response.
“The massive measures being put in place in the second half of March to contain the spread of the coronavirus—social distancing, work from home policies, closures of restaurants, retail stores, libraries, and gatherings of over 50 people—are reverberating across the economic landscape,” he said. “With millions of Americans working and caring for families at home, housing is experiencing a noticeable contraction in foot traffic, which will translate into a sharp decline in home sales over the next few months. As homebuilders are likely to put projects on standby to protect their workers, construction activity can be expected to show a noticeable further slowdown in March and April.”
BuildFax’s February report on housing supply found single-family authorizations grew 0.24% year-over-year. Existing housing maintenance volume rose 6.20% annually and the volume of housing remodel grew 5.42% annually.
“The broader economy is experiencing a volatile month as the stock market and general population reacts to the implications of COVID-19,” said BuildFax Managing Director Jonathan Kanarek. “Meanwhile, housing activity remains nearly unchanged from its growth trajectory thus far. However, COVID-19 is rapidly unfolding in the U.S. and the housing market may eventually feel the weight of this outbreak. For instance, the virus may dampen spring homebuying season this year as prospective buyers could feel reluctant to attend open houses. Additionally, quarantines may lead to declines in construction work, the already strained U.S. housing supply may continue to tighten.”