Nationwide housing starts turned upward for the first time in eight months in February, rising to a seasonally adjusted annual rate of 583,000 units in February, a gain of 22.2%.
To put this in perspective, however, the gain was primarily due to a big bump in the often-volatile multifamily market–an 82.3% surge to a 226,000-unit pace. Single-family housing starts, meanwhile, were up only about 1% to 357,000 units.
National Association of Home Builders (NAHB) Chief Economist David Crowe adds the gain “only reflects a modest rebound from January, which was the worst month in history for new-home production.”
Additionally, privately owned housing starts are 47.3% below the revised February 2008 rate.
NAHB Chairman Joe Robson, a home builder from Tulsa, OK, sees some room for hope. “Builders did pull a larger volume of single-family permits in February, suggesting a glimmer of hope for the prime home buying season, which is near at hand,” he points out. “That said, we realize there’s a need to be extremely cautious in terms of new building activity going forward, because there’s still quite a lot of inventory out there that needs to be absorbed as foreclosures continue to flood the market in many areas.”
Building permits, meanwhile, rose 3% overall to a seasonally adjusted annual rate of 547,000 units in February. This reflected an 11% gain in single-family permits to 373,000 units and a 10.8% decline in multifamily permits to 174,000 units. By region, building permits recorded a 27.6% gain in the Northeast, no change in the Midwest, a nearly 6% improvement in the South, and a 13.6% decline in the West in February.
While these numbers–and the recent economic stimulus package, which includes a first-time home buyer tax credit–offer some hope the residential market may be turning a corner, builder sentiment remained unchanged in March, deep in very weak territory, suggesting continuing soft demand, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI held steady at 9 in March, marking a fifth consecutive month of single-digit readings.
“The economy continues to be the main drag on home sales activity right now, in terms of consumer confidence across most of the country,” Crowe says. “What’s more, home builders report that tight credit conditions are posing a further hurdle, especially for potential first-time buyers, while potential trade-up buyers are finding it very tough to sell their existing homes so they can make a move.”
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
Two out of three of the HMI’s component indexes were unchanged in March, with the index gauging current sales conditions holding at 7 and the index gauging sales expectations in the next six months holding at a record-low 15. Meanwhile, the index gauging traffic of prospective buyers declined two points to 9. Three out of four regions saw no change in their HMI reading in March. The Midwest, South and West each held at near-record lows of 8, 12, and 5, respectively. The Northeast rose a single point from a record low of 8 in February to 9 in March.
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