Housing Starts, Building Permits Looking Stronger

By:
Peter King | April 19, 2010

New home construction starts have risen in each of the first three months of the year, following a small increase in March and revised data that turned a previously reported sharp downturn in February into a small increase.

Construction starts were up 1.6 percent in March, according to new data from the Commerce Department, to an annual rate of 626,000. It’s the highest rate of housing starts reported since November 2008.
 
 The figures also showed a revised February rate of 616,000 units, up from 570,000 originally reported. The original estimate would have represented a nearly 6 percent drop and raised concerns that the economic recovery may be stalling out; the new February figures represent a 1.6 percent increase in the seasonally adjusted rate.
 
Newly issued residential building permits, an indicator of future economic activity, was up strongly in March, posting a 7.5 percent increase to an annual rate of 675,000 units.
 
The increases were largely driven by renewed activity in the battered apartment and condominium construction sector, which has been bogged down by a surplus created by foreclosures and unsold developments built at the end of the housing bubble. The numbers suggest that, at least in some areas, builders are beginning to see resumed demand for multiunit dwellings.
 
Newly issued building permits for buildings of 2-4 units were up 29.4 percent in March compared to February’s totals, while permits for buildings of five or more units increased 13.2 percent. By comparison, building permits for single family homes were up a more modest 5.4 percent.
 
Construction starts on residential buildings of five or more units were up 39.7 percent in March, compared to a 0.9 percent decline for single-family units. Figures for 2-4 unit structures were not provided.
 
The increases were generally driven by strong figures in the Southern region of the country, which accounted for more than half of all construction activity. New housings starts were at an annual rate of 337,000 units in the south, an increase of 18.2 percent from February, compared to 289,000 units in the rest of the country. The Northeast, Midwest and West all posted monthly declines in housing starts.
 
It was a similar story on housing permits, with the South posting an annual rate of 360,000 units in March, compared to 325,000 units in the rest of the country. Both the South and Midwest posted increases in the monthly rate, with the Northeast and West declining.
 
The monthly housing survey by the Commerce Department includes a large sampling error and estimates are frequently recalculated as new data becomes available; the department cautions that 3-4 months of data are needed to establish underlying trends.

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