Housing Starts Reach 17-Year Low in March

Single family housing starts continued to fall in March, according to data released Wednesday morning by the Commerce Department, as builders continued to pull back on key building activities amidst ongoing economic problems tied to the the U.S. housing and mortgage markets. Total housing starts fell nearly 12 percent to a seasonally adjusted annual rate of 947,000 units for the month, while single-family starts fell 5.7 percent to a rate of 680,000 units. Single-family starts are at their lowest level since January 1991, although completions remained elevated at a 1.2 million seasonally-adjusted annual rate in March; experts — including the eponymous author of the Calculated Risk blog — expect completions to slow significantly in the month ahead as a result of fewer and fewer starts, taking construction employment with it. The National Association of Home Builders zeroed in exclusively on the lower starts numbers, which some think may now be low enough to begin reducing an enormous inventory overhang in the general U.S. housing market. “Builders are dramatically limiting starts of new homes in an environment of weak sales and heavy supply, ratcheting down production of single-family units to its slowest pace in 17 years,” said NAHB president Sandy Dunn, who also continued to beat the drum for federal housing reform. “The Senate has done a fine job already in moving forward with beneficial legislation, and we applaud its efforts to this point,” she said. “We urge the House to do the same thing and quickly advance a bill that can be reconciled with the Senate’s version and promptly sent to the President’s desk.” NAHB economist David Seiders noted that builders continue to report prospective buyers visiting models, but that few are willing or able to commit to a purchase. “It stands to reason that incentives such as a temporary home buyer tax credit and improvements to the housing finance system would help boost consumer confidence in the market and have a significant stimulative effect that could arrest housing’s heavy drag on economic growth,” he said. Either that, or it could be that many prospective buyers don’t represent a good credit risk, said some sources that spoke with Housing Wire — remember, much of the growth in housing over the past few years has been fueled by borrowers on the margin. “Our pursuit of constant growth is what drove us into questionable credit markets,” said one source, who asked not to be named. “I’m not sure where new these new droves of buyers that keep being touted are supposed to come from, given that.” Regionally, housing starts were down across the board in March, with an 8.5 percent decline registered in the Northeast, a 21.4 percent decline in the Midwest, a 12.6 percent decline in the South and a 5.7 percent decline in the West. Permit issuance was mixed by region, with gains of 3.8 percent and 0.4 percent registered for the Northeast and South, respectively, and declines of 10.6 percent and 20 percent registered for the Midwest and West, respectively.