Housing Bubble
NAHB - housing market fundamentals solid
March 18 , 2003
Unusually cold and wet weather across much of the nation, combined with economic and job market weakness and expectations of a war in Iraq, contributed to builders’ decisions to slow new-home construction from the near-record pace set in the first month of the year, as reflected by figures released today by the U.S. Commerce Department. Commerce reported an 11 percent decline from January’s seasonally adjusted annual pace of 1.82 million housing starts to a still-solid 1.62 million-unit pace in February. Meanwhile, residential building permits moved up a notch to a very strong rate of 1.79 million units.
"Builders are being careful to avoid any significant overhang in their inventories of unsold homes, and are wisely ratcheting down the pace of new construction to a rate that’s more sustainable under the current conditions of economic and geopolitical uncertainty," said Kent Conine, president of the National Association of Home Builders (NAHB) and a home and apartment builder from Dallas.
NAHB Chief Economist David Seiders added that the fundamentals of the housing market remain basically solid. "Given the strong permit numbers we are seeing, the tight inventory situation, healthy house-price performance and especially the favorable interest-rate picture, home builders are in good position to pick up the pace of housing production as today’s economic and political uncertainties head toward resolution. Assuming the best scenarios of a decisive and relatively quick end to the dispute in Iraq and an anticipated fiscal stimulus package, we’re still looking at a year-end housing production figure very close to last year’s exceptional 1.7 million units."
The entire slowdown in February occurred in the single-family sector, where starts slowed 13.7 percent to a seasonally adjusted annual rate of 1.3 million units. "Keeping things in perspective, this is just shy of the stellar 1.36 million-unit rate of single-family housing production gauged for all of 2002," Conine noted. Meanwhile, the pace of multifamily housing production appeared unaffected by the latest economic and war jitters, posting a 2 percent gain in February to a 327,000-unit rate.
Regionally, housing starts maintained an even, but relatively slow pace of 142,000 units in the Northeast and fell in each of the other three sections of the country in February. The Midwest posted the largest decline, with a 19 percent slowdown from January’s pace to a 282,000-unit rate, while the South reported a 9.4 percent decline to 742,000 units and the West showed an 11 percent decline to 456,000 units.
"After January’s phenomenal production pace - more than 1.8 million units - it was inevitable that some retraction would occur as builders caught their breath and waited out some of the worst winter conditions we’ve seen in a long time this February. But with significant weakness in the national job market, eroding consumer confidence and war jitters added to the equation, builders put the brakes on a little heavier than would otherwise have been expected," Conine said.
Building permits, which can be an indication of future building activity, held firm with a four-tenths of a percent gain to a very solid 1.79 million-unit rate in February. Single-family permits fell 6.8 percent to a 1.32 million-unit rate - which is exactly on pace with the 1.32 million single-family permits issued in 2002. Meanwhile, multifamily permits rebounded strongly from a big dip in the previous month for a 28 percent gain in February to 471,000 units.
Source: National Association of Home Builders
