Housing Starts Rose in March, and February's Dip Gets Reversed
The U.S. housing sector made modest progress in March as total housing starts rose for the third straight month, climbing 1.6% to a seasonally adjusted annual pace of 626,000 homes, the U.S. Commerce Department announced Friday. It was the highest housing start rate since November 2008.
Perhaps more significant, February starts were revised to a 1.1% increase, up from their previously estimated 5.9% decline.
Economists surveyed by Bloomberg News had expected starts to rise at a shallower angle, to a 605,000 annualized rate in March. They totaled a 616,000 annualized rate in February, 609,000 in January and 573,000 in December. Starts hit a cycle-low of 479,000 last April.
What's more, they're now up 20.2% on a year-over-year basis: In March 2009, the annualized rate was 521,000.
The March gains were focused primarily in a single region of the country: the South, where starts surged 18.2%. They plunged 8.3% in the Northeast, plummeted 28.4% in the Midwest and dipped 2.1% in the West.
In March, the single-family home starts category slipped 0.9% to a 531,000 annualized rate. Building permits, considered a leading indicator of residential construction, jumped 7.5% to an annualized rate of 685,000.
A Demonstration of How Large the Revisions Can Be
Economists follow the housing start statistic because of the large role residential real estate has played historically in the U.S. economy. Housing affects commerce in companion sectors, such as furniture, appliances, insurance and landscaping, among others. Hence, a sustained increase in housing starts usually provides a lift for U.S. GDP.
However, economists also caution that monthly housing start data contain a wide margin of error, and revisions can be large -- as they were for February. In addition, analysts underscore that it can take three to five months for a housing trend to form, and retrenchments are possible.
The March housing start report is mildly encouraging for investors. The most compelling stat is the revision in the February housing start total to a 1.1%, up from the large 5.9% decline estimate released initially. That underscores why investors shouldn't put too much emphasis on the Commerce Department's initial estimate because it demonstrates how large the revisions can be.
When February's numbers are combined with March's, the picture is one of stabilization in U.S. housing starts. If those numbers hold or improve in the months ahead, Wall Street will cheer.