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First Cut: February housing starts remain vigorous, permits issued active

Housing starts dipped 1.5% in February to 1.599 million units (SAAR) after 1.624 million in January that was the highest since December 2006. The small decline was entirely due to a 14.9% fall in multi-unit starts while single-family starts rose to 1.072 million units, the highest since 1.131 million in June 2007. Starts of new homes remained strong while due to demand for housing as mortgage interest rates took another turn lower in February. Starts soared 39.2% compared to the year-ago month.

This is another report where the survey was taken before the spread of the coronavirus reached pandemic levels and resulted in an abrupt slowdown for economic activity. However, it is possible that the housing sector will weather the COVID-19 storm better than some due to the above-mentioned low mortgage rates. For those whose income and/or job security is less threatened, near record low rates on a 30-year fixed mortgage and leverage in negotiating price in an uncertain market may make a home buy worth the risk. There are also large numbers of contracts for construction not yet start that could carry activity for a while.

Housing starts were uneven across regions, but may be due more to a reset after a big move in the prior month or two. Starts were down 41.4% in in the Northeast in February after booming 51.4% in January and 32.7% in December. Starts were up 16.7% in the Midwest after declining 24.4% in January. The South had a 15.2% rise in starts after dipping 4.3% in January. Starts in the West were down 18.2% after rising 10.4% in January and 16.9% in December.

Permits were down 5.5% in February to 1.464 million units (SAAR) after 1.550 million in January when it was the highest since 1.596 million units in March 2007. The decline left permit issuance at robust levels. Permits for single-family units were up 1.7% to 1.004 million, the highest since 1.042 million in May 2007.  While not fully recovered from the housing bust, demand for new homes is solid and permits are likely to support new construction for some months.

Permits across regions were also uneven. The Northeast retreated 25.1% in February after increasing 34.6% in January. The Midwest was down 8.2% after up 5.8% in the prior month. Permits were down 1.6% in February after up 9.1% in January. The West had a 2.5% decrease after up 2.1% in the prior month.

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