Housing starts measure initial construction of residential units (single-family and multi-family) each month. A rising (falling) trend points to gains (declines) in demand for furniture, home furnishings and appliances. Why Investors Care
| Released on 4/16/08 For Mar 2008 | |||||||||||||||||||||||
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Highlights
Both housing starts and building permits weakened further in March in some of the worst news yet for the housing market. Starts plunged 11.9 percent in the month for a year-on-year decrease of 36.5 percent, a rate exceeded only twice during the current contraction for the third worst rate since the 1991 recession. Permits, which are forward looking, fell 5.8 percent in the month for a 40.9 percent year-on-year decrease for the very worst rate since 1991. A tight credit market, a weak jobs market, and bloated supply of unsold homes continue to depress the housing sector with no sign yet of improvement.
Within starts, weakness in the latest month was led by the multifamily component which fell 24.6 percent. Single-family starts also declined - by 5.7 percent. All regions were weak but the largest decline was in the Midwest which fell 21.4 percent. The South, Northeast, and Midwest declined 12.6 percent, 8.5 percent, and 5.7 percent, respectively.
The bottom line is that housing is far from making a comeback. The Fed has stated that stabilization in housing is needed for the economy to recover and that is not happening. Bonds will like the numbers but equities will be unsettled other than for the fact that company earnings are the main focus.
Housing starts may have gotten some temporary bounce from atypically favorable winter weather but permits are still pointing down. Starts are still a little above their recent bottom even though falling back 0.6 percent to a 1.065 million unit annual rate. February's modest slippage followed a 7.1 percent surge in January. However, permits came in much weaker. While, starts can be affected by how seasonally typical the weather is, permits are less immune to vagaries in the weather. Building permits dropped 7.8 percent to a 0.978 million unit pace after declining 1.8 percent the month before. More recently, pending home sales continued to weaken, suggesting no improvement in starts in the near term.
Housing starts Consensus Forecast for March 08: 1.018 million-unit rate
Range: 0.980 million to 1.100 million-unit rate
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Monthly figures are often volatile; housing starts fluctuate more than many indicators. According to the Commerce Department, it takes six months for total housing starts to establish a trend. Consequently, we have depicted total starts relative to a six month moving average. |
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