Housing Starts Miss Expectations; Permits Fall

Homebuilding across the country lifted slightly in March but still fell short of expectations, while permits for new housing tumbled.

According to figures released Wednesday by the Census Bureau and HUD, March housing starts were at a seasonally adjusted annual rate of 946,000, 2.8 percent above February’s revised estimate but below a consensus forecast of 970,000 predicted in a survey of economists.

Last March, starts came in at a rate of more than a million annually.

Isolating single-family homes, the government reported starts were at an annual rate of 635,000, a 6 percent increase month-over-month and a 1.9 percent bump compared to last year.

Though new construction may not have hit the mark that economists were expecting—especially now that the weather has been more accommodating—even a slight increase could be seen as a promising sign at a time when builder sentiment has stagnated. The National Association of Home Builder’s (NAHB) latest measure of confidence, released Tuesday, put its sentiment index at a level of 47, a few points below the “neutral” line separating a market viewed as “good” from one viewed as “bad.”

David Crowe, chief economist for NAHB, pointed to ongoing tight credit conditions and a labor shortage as headwinds for builders right now, though he noted solid job growth and historically favorable affordability conditions will provide a boost to housing this season.

Meanwhile, permit issuance for new housing units were estimated at a seasonally adjusted annual rate of 990,000, 2.4 percent below the revised February rate but 11.2 percent above last March’s pace.

Census/HUD put single-family authorizations last month at a rate of 592,000, a climb of half a percent over February but a decline of 1.2 percent year-over-year.

While some have taken the latest government numbers as a sign of further weakening in the housing market, some economists remain ever hopeful—including Paul Diggle, property economist for macroeconomics company Capital Economics.

“[L]ooking looking further ahead, we remain upbeat about the prospects for housing starts. After all, accounting for the  recent rebound in household formation, as well as second home buying and demolitions, underlying housing demand is running at 2m per annum, well above the current level of housing starts,” Diggle said.