Home Starts Slow in March From 32-Year High

Home builders tapped the brakes in March, according to an upwardly revised report from the Commerce Department showing February’s housing starts at their highest level in 32 years and single-family production at a record peak.

Starts were down 17.6% to a still-solid seasonally adjusted annual rate of 1.84 million units in March.

“It’s been a phenomenal first quarter for home building, marked by robust buyer demand and the best production pace in decades,” said NAHB President Dave Wilson. “The March slowdown is a good sign that builders are exercising caution to keep the market healthy and inventories at a reasonable level, and many companies are taking steps to limit sales to speculators. Meanwhile, builders remain very upbeat about their prospects in the months ahead.”

“The March decline in housing starts was, to some degree, weather-related,” added NAHB Chief Economist David Seiders. “A sizeable decline in the South — the nation’s largest housing market — followed a surge that was related to rebuilding in the wake of last fall’s hurricanes, and late-winter storms apparently held back starts in other areas as well.”

Seiders noted that, “Looking at today’s permit numbers, which are a better indication of the market’s current condition than starts, the picture seems much brighter. Also, if you look at the backlog of units that have been permitted but not yet started, and the latest downshift in long-term mortgage rates, the upside potential for housing starts appears good for the immediate future.”

Single-family starts last month declined 14.4% to a seasonally adjusted annual rate of 1.54 million units. Multifamily starts, which tend to fluctuate more sharply from month to month, declined 31% in March, following exceptionally high activity in January and February.

Three out of four regions recorded double-digit declines in housing starts in March from big numbers in the previous months. Starts declined 29.3% in the Midwest, 18% in the South, 12.7% in the West and 3.6% in the Northeast.

Building permits fell a more-modest 4.0%, remaining above the two-million unit mark for the ninth consecutive month.

Single-family permits were down 5.4% and multifamily permits were up 1.1%. March permit levels remained unchanged in the Northeast and dipped 1.8% in the South, 4.2% in the West and 11% in the Midwest.

NAHB is forecasting 1.92 million total housing starts for 2005, which would be 1.4% below last year. “That 2005 performance could be even better if the interest rate structure moves up less than anticipated,” said Seiders.

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