Housing Starts Slightly Lower than Forecast

The US report on February housing starts shows that the seasonally adjusted annual rate fell -1.1% from January’s revised estimate of 706,000 to 698,000. The consensus estimate for February housing starts was 706,000. Compared with February of 2011, however, housing starts rose by 34.7% from last year’s total of 518,000.

The better news is that building permits rose sharply in February, from January’s revised total of 682,000 to 717,000. Total new building permits are up 34.3% year-over-year in February.

Permits for single-family housing are higher in all regions of the country except the West. Single-family housing starts fell in February, from 507,000 to 457,000, but multi-family starts for buildings with 5 or more units rose sharply from 181,000 to 233,000.

The rise in multi-family building starts is a good signal for the economy because it indicates that new family formation is increasing. That indicates that people are feeling more confident that they will have a job for a while and can afford to start out on their own.

The increase in new building permits also indicates that starts should increase in March, provided that the weather stays reasonably mild. Overall, this is decent news.