We all know that it has been a rough winter, but today’s Housing Starts report for the month of February took the market entirely by surprise. While economists were forecasting starts to come in at a seasonally adjusted annualized rate (SAAR) of 1040K, the actual level came in at 897K. This was the biggest miss relative to expectations since February 2007, and the fourth weaker than expected report in the last five months. While the headline Housing Starts number was atrocious, Building Permits actually came in better than expected (1,092K vs 1,065K). The fact that starts were so weak even as permits held up suggests that at least some of the weakness in this month’s report was weather related. Another indicator suggesting weather impacted February’s reading is that the headline number of 897K was the same level we saw last January, which was also one of the harshest months of last winter.
As shown in the charts below, both multi-family and single family Housing Starts were weak this month, although single-family starts (-14.9%) were down less than the headline reading while multi-family units (-20.8%) declined more. On a year/year basis, single-family units were actually up slightly. For Building Permits, the strength was the other way around, where February’s growth was driven by multi-family units (+18.3% m/m) over single-family units (-6.2%).
The table below breaks out the February Housing Starts and Building Permits report by type of unit and region. Here again, you can see the impact weather played on the report. In the Northeast, Housing Starts fell 56.5% m/m to 47K (SAAR), which was the lowest level since January 2009 and the second lowest reading going all the way back to 1959. Remember, we saw record snowfalls in some parts of the Northeast in February, and the entire region was covered in snow. In the Midwest, the weather was nearly as bad and Housing starts fell 37% to 97K (SAAR). While weather played a role in this month’s weakness, it wasn’t the only factor at work. In the South, we saw a 2.5% m/m decline, while out West Housing Starts fell 18.2%, so there was still some weakness in areas unaffected by weather.
Finally, the charts below show the regional breakdown of February Housing Starts. On the left side, you can see the steep weather related drops in both the Northeast and Midwest. On the right side, however, the charts look much less volatile, with starts in the South and even in the West sitting right in the middle of their uptrend. Later today, we will be providing clients with further analysis of today’s report and the impact of weather, so be on the look out for that.