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Starts, Permit Data Show Shift to Multifamily

Housing permits rose a sharp 4.6 percent to a seasonally adjusted annual rate of 946,000 in February, to the highest level since June 2008, while housing starts edged up 0.8 percent to 917,000, the ""Census Bureau and HUD"":http://www.census.gov/construction/nrc/pdf/newresconst_201302.pdf reported jointly Tuesday. Most--almost 62 percent├â┬ó├óÔÇÜ┬¼├óÔé¼┼ôof the increase in permits came in applications to build multifamily units.

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Economists had expected the report to show 919,000 permits (up from the originally January report of 890,000) and 925,000 starts, unchanged from the original report. Permits for January were revised down to 904,000, while January starts were revised up to 910,000. Without the revision, permit activity would have shown a far steeper increase and starts a smaller improvement.

According to the report, builders completed new homes at an annual rate of 711,000 in February, a drop of 0.6 percent from 715,000 in January, which was revised downward from the originally reported 724,000. Completions of single-family homes, though, increased 3.6 percent in February to 574,000, the highest level since June 2010, when builders completed 684,000 new single-family homes in the midst of the federal homebuyer tax credit incentive.

The numbers are showing a distinct shift in housing preference. In the last two years, single-family permits have been below 70 percent of all permits, averaging about 65 percent. In the previous two years, single-family homes averaged 75 percent of all permits.

Single-family homes accounted for 63.4 percent of all permits, but nonetheless, single-family permits rose to 600,000, the highest level since June 2008.

Similarly, single-family starts continued a steady climb upward and also reached the highest level since June 2008.

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While the comparisons are favorable, the June 2008 activity came in the midst of a steady decline in residential construction. Single-family permits peaked at 1,798,000 in September 2005, almost three times the 605,000 single-family permits in in June 2008. Single-family starts peaked at 1,823,000 in January 2006, also almost three times the 647,000 single-family starts in June 2008.

Similarly, single-family homes represent 69.5 percent of all starts in the last 24 months compared with 80.5 percent in the previous two years.

Nonetheless, the absolute improvement in both permit and start and start data is good news for the beleaguered construction sector.

""Builder confidence"":https://themreport.com/articles/builder-confidence-slips-to-5-month-low-2013-03-18 in February, as measured by the Housing Market Index (HMI) compiled by the ""National Association of Home Builders"":https://www.nahb.org/, slipped one point to 46, the first decline in 10 months. The index reported Monday for March dropped again to 44, the first time the HMI has fallen for two straight months since July-August 2010.

While new homes sales for February will be reported next Tuesday, today's report included revised data for January that showed builders completed 554,000 new homes, 117,000 more than they sold. In the last 24 months, on average, builders completed 126,000 more homes than they sold each month, down from 156,000 more completions than sales in the previous 24 months.

Total starts rose in two of the four Census regions, improving 36,000 in the Midwest to 132,000 and 16,000 in the Northeast to 103,0000. Meanwhile, starts fell 28,000 in the South to 463,000 and 17,000 in the West to 219,000.

Single-family starts also rose in two of the four regions, increasing 10,000 in the Northeast to 59,000 and 7,000 in the South to 330,000 but falling 11,000 in the West to 130,000 and 3,000 in the Midwest to 92,000.

Total permits rose in three regions, falling 18,000 in the Northeast to 81,000 but increasing 44,000 in the South (to 488,000), 14,000 in the West (to 232,000), and 2,000 in the Midwest (to 145,000).

Single-family permits also rose in three regions, falling 11,000 in the Midwest to 91,000 while improving 14,000 in the Midwest to 319,000, 9,000 in the West to 141,000 and 4,000 in the Northeast to 45,000.

_Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 a.m. and again at 9:20 a.m. EDT._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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