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February Housing Starts Slip a Slight 1.1 Percent

Mar 20, 2012

Nationwide housing starts dipped 1.1 percent to a seasonally adjusted annual rate of 698,000 units in February, according to newly released figures from the U.S. Commerce Department. This was the second-best pace of new construction since October of 2008 following an upwardly revised 706,000-unit pace in January. "Builders are reporting increased buyer interest and are expecting demand for new homes to improve in the coming months, but continue to exercise caution regarding new projects until that interest translates into more signed sales contracts," said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. "This process is certainly being slowed by today's overly tight lending conditions, the difficulty of obtaining accurate appraisals on new construction and competition from distressed properties that can make it tough for prospective new-home buyers to sell an existing home." Following four consecutive months of gains, single-family starts declined 9.9 percent to a seasonally adjusted annual rate of 457,000 units in February. Meanwhile, multifamily starts, which tend to display greater volatility from month to month, gained 21.1 percent to a 241,000-unit rate—their fastest pace since November 2011. "NAHB's most recent builder surveys have shown steady improvement in builder expectations for the next six months, and today's report reflects that optimism in the permit numbers, which are up across the board and are typically the most statistically reliable data," said NAHB Chief Economist David Crowe. "At the same time, we believe that January's exceptionally good weather was a factor in pulling some single-family starts activity forward that might otherwise have occurred in February." Regionally, starts activity was mixed in February, with the Midwest and South posting gains of 3.0 percent and 1.5 percent, respectively, and the Northeast and West posting respective declines of 12.3 percent and 5.9 percent. Nationwide permit issuance, which can be an indicator of future building activity, rose 5.1 percent to a seasonally adjusted 717,000 units in February—the strongest pace since October 2008. This gain was reflected across both sectors of the market, with single-family permits up 4.9 percent to 472,000 units (best pace since April of 2010) and multifamily permits up 5.6 percent to 245,000 units (best pace since October 2008). Permit issuance was also up in three out of four regions of the country in February, with the Northeast posting a 14.3 percent gain, the Midwest a 14.7 percent gain and the West a 12.8 percent gain. Meanwhile, the South posted a 1.9 percent decline in permit issuance following a significant gain in the previous month.
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