April 16, 2009 - Characteristic volatility in the multifamily sector pushed nationwide housing starts down 10.8 percent in March as production of single-family homes remained unchanged, according to numbers released today by the U.S. Commerce Department. Overall starts fell to a seasonally adjusted annual rate of 510,000 units, due entirely to a 29 percent reduction on the multifamily side that largely offset a big gain in apartment and condo building in the previous month.
“While improving interest among potential home buyers has builders more optimistic these days, we don’t want to ramp up production until sales of new homes pick up,” noted NAHB Chairman Joe Robson. “A cautious attitude about new building is definitely what’s called for here, and that’s what most builders have wisely adopted for the time being.”
“Today’s numbers are right on target with NAHB’s forecast, which anticipates that housing starts will bottom out in the second quarter, after new-home sales have stabilized,” said NAHB Chief Economist David Crowe. “Single-family starts remained virtually unchanged over the past three months, indicating that we are closing in on a bottom. Multifamily starts – which tend to bounce around from month to month – were responsible for the decline in total starts as they readjusted following a substantial gain in February.”
Crowe noted that while builders have been seeing more sales office traffic and fielding more calls in recent weeks as consumers respond to historically affordable home buying conditions, many continue to grapple with a severe credit crunch for acquisition, development and construction financing (AD&C). “A substantial recovery in housing of the kind that’s required to help get the national economy back on its feet will not happen until the logjam in AD&C lending has been broken,” he cautioned.
While total housing starts declined 10.8 percent to a seasonally adjusted annual rate of 510,000 units in March, single-family housing starts remained exactly on par with the previous month, at a 358,000-unit rate. Multifamily starts declined 29 percent in the month to a 152,000-unit rate, erasing a large portion of the gain posted by that sector in the previous month.
Housing starts were down in three out of four regions in March. The only region posting a gain was the Midwest, which was up nearly 16 percent. Meanwhile, the Northeast posted a 25.4 percent decline, the South a 16.8 percent decline and the West a 26.3 percent decline.
Building permits, which can be an indicator of future building activity, also fell in March. Total permit issuance declined 9 percent to a seasonally adjusted annual rate of 513,000 units, with single-family permits down 7.4 percent to 361,000 units and multifamily permits down 12.6 percent to 152,000 units.
Permit issuance declined across every region except the West in March. While that region posted no change from February, the Northeast posted a 24.3 percent decline, the Midwest a 2.3 percent decline and the South a 10.3 percent decline.