From the International Business Times:
Wednesday’s housing data was terrible.
February housing starts dropped to an annual rate of 479,000 units and building permits fell to an annual rate of 517,000 units. Both figures measure the pace of US housing construction.
According to Reuters, February’s housing starts – down 22.5 percent from the previous month – showed the largest drop since 1984 and building permits came in at the lowest level on record.
Despite the overall US economic recovery, Wednesday’s data continue to confirm the persistent weakness in the real estate market.
The large shadow inventory, subdued level of consumer confidence, and stringent lending standards are key factors responsible for the weakness in the housing market – which some experts to expect to double dip later this year.
The persistent real estate weakness “tell us the Fed will continue the QE2 [second round of quantitative easing] and the market will begin to discuss QE3,” said Douglas Borthwick, managing director at Faros Trading in Stamford, Connecticut.
“The Fed has consistently pointed to housing and employment as being important indicators for US growth,” he explained.
So the slow improvement in the jobs market and bad news coming out of the housing market may prompt the Federal Reserve to continue to be accommodative.
New construction of U.S. housing units plunged in February, erasing a sharp gain in January and coming close to an all-time-low level.
Starts fell 22.5% to a seasonally adjusted annual rate of 479,000, the Commerce Department said. This is just 0.4% above the record low of 477,000 units set in April 2009.
The decline in starts in February was the largest since March 1984.
January starts were revised higher to a 618,000 pace from the 596,000 previously reported. The 18.4% jump in January was due to an 87.4% surge in apartment starts, which analysts attributed to special factors.
As a result, economists were expecting a decline in February — but nothing close to the actual drop. Analysts polled by MarketWatch had forecasted starts to fall to a 570,000 rate.
Paul Dales, senior U.S. economist at Capital Economics, said that there is simply no need for housing starts given the excess supply of existing homes that are more attractive to buyers.
With house prices falling again, home builders have little desire to boost construction, he noted.
Building permits fell 8.2% to a record-low seasonally adjusted annual rate of 517,000 in February. Building permits for single-family homes dropped 9.3% to a 382,000 rate. Many economists consider single-family permits to be the most important number in the government’s release.