While news about the housing industry
has generally been upbeat;
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.