Housing Production Cools in February
After a 16% climb in January largely attributable to unseasonably warm weather, total housing starts cooled in February, declining 7.9% to a seasonally adjusted annual rate of 2.12 million, the Commerce Department reported on March 16.
Single-family home construction dipped 2.3% to 1.8 million units last month, and from an unsustainably high pace of 460,000 units in January, multifamily starts fell 30.4% to an annual rate of 320,000.
“The underlying market fundamentals remain solid,” said NAHB President David Pressly. “Job and income growth are moving ahead at healthy levels. Today’s starts numbers are another indicator that points towards an orderly cooling down process for the housing market in 2006.”
“So far this year, housing starts have received a boost from unusually mild winter weather, even in February, and we expect to see these numbers move further down in the months ahead,” said NAHB Chief Economist David Seiders. “Indicators that measure housing demand — home sales, applications for home mortgages and our own survey of single-family builders — show that the cooling process has begun. Furthermore, single-family permits, which are less affected by weather than single-family starts, have been trailing down gradually from their highs last fall.”
Seiders added that the evolving slowdown is actually a healthy development and should not lead to any major contraction in the housing markets.
“Last year’s record-level of housing starts and double-digit price appreciation were unsustainable, and they encouraged many investors and speculators to enter the market,” he said. “With demand slowing, we expect to see price appreciation also falling back into the single-digit range, and that will discourage short-term speculators from jumping into the market. We anticipate another solid year for housing in 2006, with new-home construction and new home sales down about 7% from last year’s all-time highs.”
Regionally, construction of new homes and apartments in February was down 23.5% in the Northeast, 10.4% in the Midwest and 11.2% in the South. Starts rose 7.9% in the West.
The number of total building permits issued last month fell 3.2% to a seasonably adjusted annual rate of 2.145 million. Single-family permits fell 3% to 1.639 million, while multifamily permits increased 1.1% to 532,000.
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