Housing starts fell 5.9% in February; bad weather is partly to blame
Housing starts fell 5.9% in February from the month prior, the latest sign that builders are acting cautiously in the face of competition from discounted bank-owned properties.
New housing units were built at a seasonally adjusted annual rate of 575,000 units in February, the Commerce Department said Tuesday morning, below the revised January estimate of 611,000, but still 0.2% above the 574,000 rate of February 2009.
Single-family homes fared better than multi-family units. Single-family homes were started at a rate of 499,000 units, 0.6% below the revised January figure of 502,000. The February rate for buildings with five units or more was 58,000, down 43.1% from a revised figure of 102,000 in January.
“Tight credit conditions, anemic demand, and inventory pressure from the ‘used’ home market are all keeping builders on the gurney,” Michael D. Larson, a housing and interest rate analyst with Weiss Research, wrote in a note to clients Tuesday morning. “While the inventory of new homes on the market has plunged to the lowest level since the early 1970s, distressed inventory continues to be parceled out into the market. That means buyers have plenty of cheap existing homes to choose from.”
Starts were up 7.9% in the West and 10.6% in the Midwest, while they dropped 15.5% in the South and fell 9.6% in the Northeast.
In his note Tuesday morning, Nigel Gault, U.S. economist for IHS Global Insight, blamed the mixed housing results on last month’s weather. The market should pick up as the economy begins to recover later this year, he added.
“As the year progresses … we expect some improvement in new home sales as employment begins to rise, and expect a gradual increase in housing starts both to meet that demand and to stabilize inventory,” he wrote.
Building permits, considered a good gauge of future activity, were at a seasonally adjusted annual rate of 612,000, the Commerce Department said. That was 1.6% below the revised January rate of 622,000, but 11.3% above the February 2009 estimate of 550,000.
-- Alejandro Lazo