Housing Starts Dipped in February, Impact From Coronavirus Remains to Be Seen

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Housing starts dipped month-over-month in February but remained well above year-ago levels, according to estimates from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

Starts were at an annual rate of 1.599 million, a decrease of 1.5% compared with a revised 1.624 million in January but up a whopping 39.2% compared with 1.149 million in February 2019.

Starts of single-family homes were at an annual rate of 1.072 million, an increase of 6.7% compared with a revised 1.005 million in January.

Starts of multifamily properties (five units or more per building) were at a rate of 508,000, a decrease of 17.0% compared with 612,000 in January.

Regionally, and month-over-month, combined single- and multifamily housing production increased 16.7% in the Midwest and 15.2% in the South. However, starts fell 41.4% in the Northeast and 18.2% in the West.

Building permits were also down month-over-month but up year-over-year. They were at an annual rate of 1.464 million, a decrease of 5.5% compared with a revised 1.550 million in January but up 13.8% compared with 1.287 million in February 2019.

Permits for single‐family homes were at a rate of 1.004 million, an increase of 1.7% compared with 987,000 in January.

Permits for multifamily properties were at a rate of 415,000 in February, a decrease of 20.2% compared with 520,000 in January.

Regionally, permits dropped 25.1% in the Northeast, 8.2% in the Midwest, 1.6% in the South and 2.5% in the West.

Housing completions lagged slightly both month-over-month and year-over-year. They were at a seasonally adjusted annual rate of 1.316 million – down 0.2% compared with January and down 1.2% compared with a year earlier.

Completions of single‐family homes were at a rate of 1.027 million, an increase of 14.1% compared with the previous month.

Completions of multifamily dwellings were at a rate of 280,000, down 31.4% compared with the previous month.

The big question, of course, is how much the economic impact from coronavirus will effect home construction in the months to come.

“February’s housing starts numbers, a leading indicator of future completions and net new supply to the housing market, are positive on a year-over-year basis,” says Odeta Kushi, deputy chief economist for First American, in a statement. “But, those numbers are in our rearview mirror, and the extent to which the coronavirus pandemic affects consumer confidence and future home building reports remains to be seen.”

“Demand from homebuyers is strong compared to last year,” says Bill Banfield, executive vice president of capital markets for Quicken Loans, in a separate statement. “Interest rates have fallen dramatically and should be attractive to prospective buyers.

“The results of this survey, however, may be reflecting the early stages of the coronavirus impact on the housing market,” Banfield adds. “The true economic effects of the virus on both buyers and builders has yet to be seen.”

Robert Dietz, chief economist for the National Association of Home Builders, left little doubt that the impact from coronavirus will result in a slowing of construction activity.

“As indicated by some of the softening in builder confidence in March, housing construction faces significant headwinds as we enter the spring season,” Dietz says. “With a rising number of economic sectors on a partial or full pause due to coronavirus mitigation, housing demand and the ability to continue full construction of homes is at significant risk.”

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