The Commerce Department Thursday morning reported an unexpectedly large decline in housing starts for the month of March, damping at least some enthusiasm for the notion that the housing markets were at or near a bottom.
The Census Bureau and Department of Housing and Urban Development, which compile the data, reported that privately-owned housing starts in March fell 10.8% below February to a seasonally adjusted annual rate of 510,000. The decline follows an unusually large jump in starts in February due to activity in the multifamily sector, but that jump was revised downward to 572,000 from the original 583,000. The March rate is 48.4% below the March 2008 rate of 988,000.
Single-family housing starts in March were at a rate of 358,000, unchanged from February and virtually flat with January's 356,000 but 49.6% below the pace of March, 2008.
Regionally, starts were up 6.3% in the Northeast, down 41.7% from last year, with single-family up 30.6%. The Midwest was up 15.9%, down 24.4% from March, 2008, with single-family up 3.6%. The South was down 16.8%, 49.7% off last year's pace, with single-family down 7.3%. Similarly, the West sank 26.3%, putting it 67.3% below March of last year, with single-family up 3.3%.
Permits also were down, albeit by a slightly lesser margin of 9% from February to a seasonally adjusted annual rate of 513,000, 45% below the March 2008 estimate of 932,000. Single-family permits also fell, by 7.4%, to a rate of 361,000, 41.9% off last year's pace.
Regionally, permits were down 24.3% in the Northeast, 49.5% off last year's pace, with single-family down 8.1%. The Midwest was off 2.3%, down 33.3% from last year, with single-family declining 20.0%. The South was down 10.3%, 46.4% off last year's rate, with single-family down 4.7%. The West was flat with February but down 46.1% from last year, with single-family permits down 1.5%.
Markets were expecting starts and permits to be down 6.5% and 2.5% sequentially to to 545,000 and 550,000, respectively..
Carl Reichardt of Wachovia Securities put out a research note to investors pointing out that nearly all of the swing in the February and March data occurred in the multifamily sector. "The production function of the homebuilding industry is very quiet," he wrote. "Given industry overcapacity, with over 6.4 million vacant units in the U.S. for sale or for rent according to the Department of Commerce as of Q4 2008, large additions to the supply base seem unlikely near term, and we expect starts to remain relatively depressed even as new home sales activity begins to recover."