While news about the housing industry has generally been upbeat; mortgage rates down yet again this week; home price acceleration leveling off from "irrational exuberance" to a mere euphoria, someone just threw a bit of cold water on the homebuilding sector of the market.

On Tuesday, the Census Bureau and the U.S. Department of Housing and Urban Development issued their March joint report on new residential construction for March 2005. The report stated that housing starts in March fell to a seasonally adjusted rate of 1.837 million, down 17.6 percent from the February figure of 2,229,000 and 8.2 percent below the March 2004 figures.



To put this in a bit of perspective, February's figures, originally reported at 2.195 million and then, as is typical, revised, this time upwards, as firmer numbers were received, represented, even at the lower number, the highest rate of housing starts in 21 years. Still, even though this record benchmark would be tough to top, the March rate fell substantially below expectation. According to CBS Marketwatch, economists were looking for a decrease from February's record figures, but only to about 2.09 million housing starts.

The largest proportion of the downturn was in the multi-family sector. Single family starts were down 14.4 percent from February but beginning construction of properties of five or more units declined 31.5 percent. (Data on two to four unit construction was not reported as it failed to meet reporting reliability standards.) Regionally the Midwest was the biggest loser with single family starts down over 19 percent and total starts decreasing nearly 30 percent. The South declined 18 percent, the West 12.7 percent and the Northeast 3.6 percent.

Looking at the pipeline, the two agencies reported that building permits were at 2,023,000, off 4 percent from the previous month but still slightly above March 2004 figures.

The two agencies warn that month-to-month changes in seasonally adjusted statistics often show irregular movements and that it may take four months to establish an underlying trend for permit authorizations and five months for statistics on total starts. There is also a relatively large array of relative standard errors for the data. Still, the screeching halt in housing starts from February to March is striking.