Recent housing starts data for Feb 2014 were almost flat owing
to unfavorable weather and lack of lots and skilled labor.
Data released by the U.S. Department of Housing and Urban
Development and the U.S. Census Bureau showed that housing starts
in February were 907,000, down from 909,000 in January.
Regionally, the combined housing starts data were mixed in
February. The Midwest witnessed a 34.5% increase in housing
starts while the South rose 7.3%. Housing starts declined 37.5%
in the Northeast and 5.5% in the West. On the other hand,
single-family housing construction increased 0.3% in February
while multifamily starts declined 2.5%.
The National Association of Home Builders (NAHB)/Wells Fargo
Housing Market Index (HMI) has also mirrored a similar sentiment
with regard to the homebuilders' confidence for newly-built,
single-family homes. HMI jumped a point to 47 in March from 46 in
February. HMI remained below 50, which is the dividing line
between expanding and contracting activity levels.
In fact, homebuilders remain concerned about the shortage of
lots and skilled labor, rising cost of materials and declining
level of new homes in inventory, which has decelerated sales
since the second half of 2013. As a result, many companies saw
declining order trends in the past quarter.
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Orders declined around 18% at
) and around 10.6% at
Hovnanian Enterprises, Inc.
) in the last reported quarter. Though order trends improved year
over year for others like
Toll Brothers, Inc.
D.R. Horton, Inc.
), they slowed down from the past quarter.
) also witnessed soft order trends in the past 2-3 quarters.
However, as the winter chill subsides, housing demand is expected
to pick up with the onset of the spring selling season.
The spring selling season is expected to be encouraging on the
back of favorable mortgage rates, affordable prices and overall
improvement in economy. In fact, this is best reflected in
recently released building permit data, which is an indicator of
future home building activity.
Released in March 2014, issuance of new building permits
increased 7.7% in February. It may be noted that though
multifamily permits increased 27.6%, single-family permits
Despite stronger housing demand expected during the spring
selling season, the supply side of the housing industry remains
volatile, owing to lack of lots and labor, rising cost of
materials and declining level of new homes in inventory. We will
wait and see if the new housing starts data for Feb 2014, to be
released on March 25, offers an encouraging outlook for the