Real Estate Blog

Housing starts rose to an annual pace of 1.52 million in March, the Census Bureau reported, from a revised 1.51 million rate in February. Economists surveyed by Briefing.com had forecast the pace of building would slow to a 1.5 million rate in March.
But most of the country saw a decline from February’s pace of housing starts. The South, which accounts for about half the nation’s home building, showed a 3 percent decline, and building fell nearly 8 percent in both the Northeast and West.

The exception to that trend was the Midwest, where starts jumped 44 percent in the Midwest after a February reading that was the slowest in 16 years. Bad weather in the region in February and relatively good weather in March probably played a role in the jump, as builders tried to catch up with delayed projects.

“The Midwest number is somewhat outlandish,” said David Seiders, chief economist for the National Association of Home Builders. “Clearly there were some weather gyrations. We know the region is not in some kind of resurgent mode.

“If you hadn’t had the number in the Midwest, we would have been down from a February number that was revised lower,” said Seiders. “And the March number is still below the original February number.
Building permits, often seen as a measure of builders’ confidence in the market, edged up to an annual rate of 1.54 million in March from 1.53 million in February. The consensus forecast had been for permits to slow to a 1.52 million rate.

Despite the modest growth from February levels, both starts and permits were well below year-ago levels, as starts sank 23 percent and permits tumbled nearly 26 percent.

Bill Hampel, chief economist Credit Union National Association, said even with the slight improvement in starts and permits, it may be years too early to call a bottom to the home building market.

“I don’t think it’s going to plummet from here, but the outlook is very modest,” he said. “We’re going to have trouble beating this number in the next several months. And we may come in 1.4 million or fewer starts for all of 2007.”

The March report left the pace of building in the first quarter down 5.5 percent from the fourth quarter of 2006, Seiders said, and down 30 percent from year-earlier levels.

“The fundamental trend is still slightly downward,” he said. “The signals on the demand side of the market are not that reassuring.” He said until there is sign of increased demand for new homes, the industry is better off with a relatively weak pace of building because it won’t add to the glut of homes on the market.