New Residential Construction (Census Bureau)

(April 16, 2009 Release)


• Residential housing construction registered 510,000 units in March, down 10.8 percent from February. The decline in housing starts was much stronger than expected.
• The 3 month average is 523,000 which continues to reflect a dismal home building marketplace. The March starts number is 48 percent below a year ago.
• Most of the decline in starts were due to multi-family construction activity rather than single family activity. Single family starts were flat in March while multi family starts were down29 percent.
• Building permits were down 9 percent in March to 513,000, which does not portend favorably for future residential construction activity.

Source: Census Bureau

New Residential Construction (Mil. SAAR)
  Mar 09 Feb 09 3 mo Avg 1 year ago
Housing Starts 0.510 0.572 0.523 0.988
% change -10.8 17.2  
Single Family 0.358 0.358 0.357 0.711
% change 0.0 0.6  
Multi-Family 0.152 0.214 0.166 0.261
% change -29.0 62.1    
Northeast 0.067 0.063 0.056 0.115
% change 6.3 70.3    
Midwest 0.102 0.088 0.083 0.135
% change 15.9 49.2    
South 0.268 0.322 0.281 0.515
% change -16.8 26.8    
West 0.073 0.099 0.103 0.223
% change -26.3 -28.3    
Total Building Permits 0.513 0.564 0.536 0.932
% change -9.0 6.2    



The larger than expected drop in housing starts in March was disappointing news.  However, all of the decline can be attributed to multifamily construction activity which fell 29 percent. The multifamily component is usually erratic from month to month and is not as reliable as the single family component which was flat for the month. Focusing on single family starts, it is possible that the housing correction may be nearing a bottom; the cyclical low for starts was 488,000 in January. However, building permits were down 9 percent which suggests that residential construction activity will remain depressed in the coming months.

Aside from the disappointing starts numbers for March, the backdrop for home building may be improving.  All three major housing measures- starts, existing home sales and new home sales- are above their cyclical lows. And even though housing inventories remain excessive, the supply of homes on market has slowly come down. Further, mortgage rates are now at historic lows and home prices have dropped considerably, improving affordability conditions. We also believe that the fiscal stimulus package offers a positive influence on the housing sector. Finally, Obama’s foreclosure mitigation plan is expected to slow the pace of foreclosures, providing more opportunities for new home sales.

On balance, the housing sector remains very weak and there remain risks to the downside. But, recent market developments suggest that the housing correction may be winding down. We continue to believe that the residential construction marketplace will remain weak for the remainder of this year, but at least, the worst may be over.

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