Housing starts dropped by 22.5% in February as inventories of Single Family homes still incredibly high

Housing starts fell back in February after an unexpectedly strong showing in January. Mostly, it was a partial reversal of the earlier spike in the multifamily component but single-family starts weakened significantly.

Housing starts in February dropped a monthly 22.5% after jumping 18.4% the prior month. The February annualized pace of 0.479 MM units was sharply lower than the median forecast for 0.560 MM units and is down 20.8% on a year-ago basis. The February reversal was led by a monthly 46.1% drop in multifamily starts, following an 87.4% surge in January. The single-family component fell 11.8% in February after edging up 1.4% the prior month.

Several factors likely affected the latest starts number which is extremely low. First, January's jump was way above trend and some reversal should be expected. Second, winter months are notoriously volatile and starts may have been hampered by severe weather. Finally, housing demand is still soft and inventories of single-family houses are still high. The bottom line is that housing is still anemic and we can expect more pain going forward.  Via Census:  
BUILDING PERMITS

Privately-owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 517,000. This is 8.2 percent (±3.3%) below the revised January rate of 563,000 and is 20.5 percent (±3.5%) below the February 2010 estimate of 650,000.

Single-family authorizations in February were at a rate of 382,000; this is 9.3 percent (±1.2%) below the revised January figure of 421,000. Authorizations of units in buildings with five units or more were at a rate of 121,000 in February.

HOUSING STARTS

Privately-owned housing starts in February were at a seasonally adjusted annual rate of 479,000. This is 22.5 percent (±9.8%) below the revised January estimate of 618,000 and is 20.8 percent (±9.0%) below the February 2010 rate of 605,000.

Single-family housing starts in February were at a rate of 375,000; this is 11.8 percent (±10.0%) below the revised January figure of 425,000. The February rate for units in buildings with five units or more was 96,000.

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