Housing Starts and Permits Stall in February

Nationwide housing starts and issuance of permits for new housing construction both posted disappointing declines in February as concerns about a growing number of factors caused builders to pull back on production of new homes, according to newly released figures from the U.S. Commerce Department. Total housing starts declined 22.5 percent from January to a seasonally adjusted annual rate of 479,000 units, the second-slowest pace on record. Equally disconcerting, total permit issuance for new homes fell 8.2 percent to a record low pace of 517,000 units in February.

"The decline in new construction and permits in February is the culmination of a great deal of nervousness that both builders and consumers are feeling right now," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "In an already-fragile market where credit for building and buying homes remains extremely tight, additional concerns about energy costs, interest rates and other factors are contributing to an atmosphere in which many have adopted a very cautious stance." Nielsen noted that, as part of NAHB's annual legislative conference taking place today, hundreds of home builders are personally taking the message to Congress that the flow of credit for housing must quickly be restored.

"While our latest member surveys showed a slight uptick in expectations for the future, there are just too many uncertainties out there for most builders and buyers to comfortably move forward with a new-home project at this time," acknowledged NAHB Chief Economist David Crowe. "We need to see several months of consistent improvement in economic factors, plus concrete signs that the flow of credit to housing is improving, in order for the industry to return to a steady recovery and facilitate job growth."

The declines in February housing starts were broad-based, reaching to every sector and region of the country. While single-family starts declined 11.8 percent to a seasonally adjusted annual rate of 375,000 units, multifamily starts – which tend to display greater volatility on a month-to-month basis – declined 46.1 percent to a rate of 104,000 units. Regional declines amounted to 37.5 percent in the Northeast, 48.6 percent in the Midwest, 6.3 percent in the South and 28 percent in the West.

Declines in permit issuance were also widespread in February. The single-family sector posted a 9.3 percent drop to 382,000 units while the multifamily sector posted a 4.9 percent drop to 135,000 units, and regional declines amounted to 27.8 percent in the Northeast, 5.4 percent in the Midwest, 1.4 percent in the South and 13.6 percent in the West.