More evidence that the housing market may be bottoming out, although the continuing credit crunch and a decline in permits are worrisome for future growth.

Characteristic volatility in the multifamily sector pushed nationwide housing starts down 10.8% in March as production of single-family homes remained unchanged, according to the Department of Commerce. Overall starts fell to a seasonally adjusted annual rate of 510,000 units, due entirely to a 29% reduction on the multifamily side that largely offset a big gain in apartment and condo building in the previous month.

“While improving interest among potential home buyers has builders more optimistic these days, we don’t want to ramp up production until sales of new homes pick up,” notes NAHB Chairman Joe Robson. “A cautious attitude about new building is definitely what’s called for here, and that’s what most builders have wisely adopted for the time being.”

“Today’s numbers are right on target with NAHB’s forecast, which anticipates that housing starts will bottom out in the second quarter, after new-home sales have stabilized,” says NAHB Chief Economist David Crowe. “Single-family starts remained virtually unchanged over the past three months, indicating that we are closing in on a bottom. Multifamily starts–which tend to bounce around from month to month–were responsible for the decline in total starts as they readjusted following a substantial gain in February.”

Crowe notes that while builders have been seeing more sales office traffic and fielding more calls in recent weeks as consumers respond to historically affordable home buying conditions, many continue to grapple with a severe credit crunch, which could impair market recovery.

While total housing starts declined 10.8% to a seasonally adjusted annual rate of 510,000 units in March, single-family housing starts remained exactly on par with the previous month, at a 358,000-unit rate. Multifamily starts declined 29% in the month to a 152,000-unit rate, erasing a large portion of the gain posted by that sector in the previous month.

Housing starts were down in three out of four regions in March. The only region posting a gain was the Midwest, which was up nearly 16%. Meanwhile, the Northeast posted a 25.4% decline, the South a 16.8% decline and the West a 26.3% decline.

Building permits, which can be an indicator of future building activity, also fell in March. Total permit issuance declined 9% to a seasonally adjusted annual rate of 513,000 units, with single-family permits down 7.4% to 361,000 units and multifamily permits down 12.6 % to 152,000 units.

Permit issuance declined across every region except the West in March. While that region posted no change from February, the Northeast posted a 24.3% decline, the Midwest a 2.3% decline and the South a 10.3% decline.

Craig DiLouie

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