Starts for new U.S. housing down 22.5 percent since January

Posted: March 17, 2011

Housing starts in February fell 22.5 percent from January to their second-lowest level since 1946, the Census Bureau reported Wednesday.

The most accurate measure of the health of the new-home market, however, was in the permit numbers for the month, and they were, as one economist remarked, "awful."

Permits fell 8.2 percent from January and were 20.5 percent below February 2010.

"It looks like developers took a vacation in February," said economist Joel L. Naroff of Holland, Bucks County.

Although single-family permit losses, at 9.3 percent, were almost twice that of multifamily permits at 4.9 percent, the drop in the building of larger multifamily buildings - with five or more units - fell 22 percent in the Northeast and 14 percent in the West.

Single-family starts fell 11.8 percent from January; multifamily starts were down 46.1 percent, the bureau said.

Naroff observed, however, that there had been a huge rise in housing starts in January, which he couldn't explain given that month's terrible weather.

"If you average January and February together - a reasonable thing to do when you don't trust the numbers - construction activity is doing exactly what was expected: going basically nowhere slowly," Naroff said.

IHS Global Insight housing economist Patrick Newport said there had been a 50 percent spike in multifamily permits in the Northeast in December, related to changes in the building codes in New York and Pennsylvania that were effective Jan. 1.

Multifamily permits in the Northeast fell 32 percent in January after the codes changed. California multifamily permits fell 14 percent, again owing to building-code changes there.

And starts in both categories followed suit.

One of the Pennsylvania code changes, the requirement of residential sprinkler systems, affected one- and two-family houses, causing a spike in applications for permits in those categories in late 2010.

Pennsylvania home builders and allied groups have succeeded so far in securing repeal of the requirement in the state House, by a 154-39 vote March 7. The Senate will consider repeal in April.

"The main reason starts are stuck at the bottom is that a weak labor market has depressed the household-formation rate," Newport said.

Although Newport believes "housing will get back on its feet this year," he acknowledges that builders' access to credit is one of the keys to that.

Hundreds of home builders are in Washington this week lobbying Congress, urging that "the flow of credit be restored," said Bob Nielsen, chairman of the National Association of Home Builders, which is coordinating the efforts on Capitol Hill.

"There are just too many uncertainties out there for most builders and buyers to comfortably move forward with a new home project," said the association's chief economist, David Crowe.

Other factors are weighing down the new-home market, including competition from cut-rate distressed sales, especially in the West; difficulties in selling existing homes; and appraisals coming in too low, builders say.

But credit is a huge one.

"If builders cannot get financing to build new homes, housing will remain in the dumps," Newport said.

Contact real estate writer Alan J. Heavens at 215-854-2472,, or Twitter: @alheavens.

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