US Home Construction Drops in February

New US home building dropped in February, reversing the slight rebound in January and continuing the slowing trend seen through most of last year, the government reported Tuesday. The Commerce Department data were delayed due to the December-January government shutdown, which could have skewed some of the data on when home construction was started and completed.

The report showed housing starts fell 8.7 percent compared to January to a 1.16 million annual rate, seasonally adjusted, well below the consensus forecast. And that building pace for all homes and apartment buildings is nearly 10 percent below February 2018, the data showed.

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The housing industry is a key sector of the economy since it generates so much associated activity, including purchases of big ticket items like furniture and appliances, but recent data have indicated the sector may have peaked.  Economists attribute that partly to the shortage of workers as well as indications the US economy is slowing, which has cooled demand, but some expect a rebound in home sales.

The report showed construction of single-family homes plunged nationwide — for a total monthly decline of 17 percent — offset by a 23.5 percent jump in multi-family units.  The Midwest was the only region of the country that did not see a double-digit decline in single family starts, with the Northeast posting the biggest drop of 42 percent.

Meanwhile, building permits, a sign of home construction in the pipeline, fell 1.6 percent, and are 2 percent below the level a year ago. Single-family permits were flat compared to January while multi-family units were down more than 18 percent, the report said.

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Ian Shepherdson of Pantheon Macroeconomics says the permits data is the more important signal, and he is expecting a rebound in home sales, based on rising mortgage applications. “Starts follow permits, and will rebound in due course; the February drop is not a useful guide to the trend,” he said in a research note. “Fear of a serious housing slowdown is misplaced.”