U.S. Housing Starts, Permits Jump Unexpectedly

March 17, 2009
Analysts say February uptick is a rebound, not a recovery.

U.S. home construction starts and permits saw a surprise jump in February from 50-year low levels in a positive sign for the moribund home market at the epicenter of global financial crisis. Housing starts -- or privately owned new homes on which construction has started -- soared 22.2% to a seasonally adjusted annual rate of 583,000 units after seven months of decline, the Commerce Department said. It was much higher than the revised January estimate of 477,000 and consensus forecast of 450,000. Permits to build new homes, an indicator of future activity in the housing sector, rose 3% to a seasonally adjusted annual rate of 547,000 in February, the department said. It was above the revised January rate of 531,000 and consensus forecast of 500,000. Starts and permits were at their lowest pace in January since the Commerce Department began tracking the data in 1959. Analysts were baffled by the rise in housing starts led by the notoriously volatile multifamily segment and aided by weather conditions, saying they do not see concrete signs of recovery in the housing market yet. The real good news, they said, was the slight recovery in single-family building permits -- for the first time in nine months -- and the stabilization in single-family starts. The leap in starts, propelled by an 82.3% surge in multifamily sector, reversed almost all the drop in starts over the previous three months, analysts noted. "We see no specific factor that might explain this jump; multifamily starts are always noisy but this is exceptional," said Ian Shepherdson of High Frequency Economics. "With new home sales still falling and the [inventory] at a record [high] there is no reason for homebuilding to rise," he said. "This is a temporary rebound, not a recovery, though it likely means the post-Lehman crash is over." The September 2008 collapse of Lehman Brothers, one of Wall Street's most established investment banks, on the heels of the home mortgage crisis sparked turmoil on financial markets across the world. The latest figures showed that the increase in housing activity was concentrated in the wealthiest Northeast region, where starts jumped 89%. Analysts were also unsure whether this month's gain -- even at a more measured pace -- can be sustained in March, although they believed a near $800 billion stimulus package and home foreclosure mitigation plan by President Barack Obama's administration could help stabilize the housing market by year's end. The February figures were "clearly not a sign of an upturn in the sector but could be at best considered as a first sign of stabilization," Marie-Pierre Ripert of Natixis said. Copyright Agence France-Presse, 2009

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