Housing Bubble
Housing Starts Gain Momentum in March, Boding Well for 2003
A substantial increase in new home construction last month provided reassurance that housing activity will proceed at a healthy level this year, according to Kent Conine, president of the National Association of Home Builders (NAHB) and a house and apartment builder from Dallas.
Figures released today by the U.S. Commerce Department showed that new homes were started at a seasonally adjusted annual rate of 1.78 million in March, an increase of 8.3 percent from February’s pace of 1.64 million units.
"In an economy that continues to display overall weakness, housing remains a remarkable source of strength," said Conine, "and we are confident that the industry will experience a very good year in 2003."
NAHB Chief Economist David Seiders said that today’s Commerce Department report "provides good news that the industry remained resilient through major weather gyrations as well as uncertainties related to the war in Iraq and a potential terrorist backlash. It’s now clear that, in this year’s first quarter, housing once again provided a solid contribution to growth in the nation’s Gross Domestic Product."
Single-family starts in March climbed 7.7 percent to an annual rate of 1.41 million and the rate of multifamily construction during the month quickened to a pace of 366,000, a 10.6 percent gain.
The March resurgence in home starts, said Seiders, indicates that "it was indeed harsh winter weather that was largely to blame for the big decline in February," and not an erosion of consumer confidence in housing or deteriorating market fundamentals.
"The strength of March’s housing numbers suggests that very low interest rates have really helped and that we have excellent momentum going into the second quarter," he said. Noting that "falling mortgage interest rates have been holding the housing affordability equation together," Seiders said he expects "a long-term interest rate rise only gradually over the balance of the year, by about half a percentage point, as the economy improves in the wake of success in the war effort. The Federal Reserve is likely to hold monetary policy steady until late in the year before gradually raising short-term rates."
While the seasonally adjusted annual rate of housing permits dropped 7 percent in March, Seiders said that the decline was concentrated in the multifamily sector following a surge in those permits the month before. Single-family permits were down by only one percent.
Regionally, housing starts climbed 9.8 percent to a rate of 157,000 in the Northeast; 25.4 percent to 355,000 units in the Midwest; and 9.4 percent to 827,000 units in the South. Starts registered a 4.5 percent decline in the West, to an annual rate of 441,000, but still remained above the pace a year earlier.
Source: National Association of Home Builders
