Housing Starts Slow Down in March

Homebuilders slowed down in March following an upwardly revised February housing starts number that was the highest in 32 years and the highest-ever recorded figure for single-family housing starts, according to Commerce Department data.

“It’s been a phenomenal first quarter for home building, marked by robust buyer demand and the best production pace in decades,” said Dave Wilson, a custom home builder from Ketchum, Idaho, and president of the National Association of Home Builders (NAHB). “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.”

Starts were down 17.6 percent to a still-solid seasonally adjusted annual rate of 1.84 million units in March. Single-family starts declined 14.4 percent to a 1.54 million-unit rate. Meanwhile, multifamily starts, which tend to fluctuate more significantly from month to month, declined 31 percent in the latest report following exceptionally high activity in both January and February.

“The March decline in housing starts was, to some degree, weather-related,” added NAHB chief economist David Seiders. “A sizeable decline in the South region (the nation’s largest housing market) following 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.”

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

Building permits recorded a more modest decline of 4 percent, remaining above the 2 million-unit mark for the ninth consecutive month. Single-family permits were down 5.4 percent while multifamily permits eked out a 1.1 percent gain in March. All but one region posted declines, with the Northeast showing no change in the level of permit activity and the Midwest, South and West reporting 11 percent, 1.8 percent and 4.2 percent slowdowns, respectively.

NAHB forecasts show 1.92 million housing starts for 2005 as a whole, down 1.4 percent from 2004’s total. “That 2005 performance could be even better if the interest rate structure moves up less than anticipated,” said NAHB’s Seiders.

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