 | Housing starts fell 22.5% in February to 479,000 units at an annual rate |
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Implications: The housing news today was not pretty. Starts fell very close to the April 2009 low, which is also the lowest level on record dating back to the 1950s. After spiking up sharply in January, multi-family units, which are extremely volatile from month to month, pulled back in February. Meanwhile, single-family starts also fell and continue to scrape along the bottom. Some of the February decline is probably due to unusually bad winter weather, which shifts builders away from breaking ground and gets them inside. Supporting this idea, home completions jumped 14%, and both single- and multi-family completions increased. In addition, anyone who has taken out a mortgage lately knows the lending process can be like torture. We still believe housing will normalize to much higher rates of both building activity and sales over the next several years, but unreasonably tight credit right now is slowing down that progress. Also, despite the weakness in February, the general upward trend in multi-family units remains intact. That should continue, in part due to tight credit but also foreclosures, as owners shift to renting. In other recent news, the Empire State index, a measure of manufacturing activity in that state, increased to +17.5 in March from +15.4 in February, a larger increase than the consensus expected. So while housing suffers, manufacturing continues to improve.
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