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First Cut: February housing starts decline, retracing some of January gain; permits issued about on track

Starts of new homes were down 8.7% in February from January to 1.162 million units (SAAR) after 1.273 million in January. Starts of single-family homes fell 17.0% to 805,000 while multi-units were up 17.8% to 357,000.  Some of the story may be related to weather and the bitter cold that blanketed parts of the Midwest and Northeast in early February as well as some winter storms. However, it appears that it is more the case of a rest after the increase in January and a softer underlying trend of new construction of homes. Also, some of this may reflect a shift to demand for townhomes and condos which can be more affordable to first-time home buyers.

Starts of all units were 9.9% lower than a year-ago with single-family units down 10.6% and multi-units up 21.4%.

Starts were down in three of four regions in February from January. The Midwest actually had an increase of 26.8% while the Northeast declined 29.5%, the West was down 18.9%, and the South was down 6.8%.

Permits issued were off 1.6% in February from January, down to 1.296 million units (SAAR). This was the second month in a row where permits were lower. However, the February decline was entirely due to a 4.2% decline in multi-units whereas single-family permits were flat. Overall permits were down 2.0% from a year ago. The January and February levels for permits seem to be about on the underlying trend and consistent with normal month-to-month variation, especially in the less predictable winter months.

Limited housing supplies and lower mortgage interest rates may well help spur demand for new housing this spring.

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