Below is an analysis of housing starts data sent to Bespoke Premium clients on Tuesday in The Closer, along with additional supporting data points and implications for March’s starts release. For access to The Closer, please sign up for a free trial of Bespoke Premium today.
The story of the day Thursday was the massive miss in housing starts. For a detailed breakdown of individual data series, please see our blog post “Housing Starts Buried”. At right, we show the headline Housing Starts series which missed by a mile: 897,000 seasonally adjusted annual rate starts in February versus 1,040,0000 expected. Digging into the data, this was a weak report, as we discussed in our previous post. While permits (less volatile and a strong leading indicator) were stable and actually beat expectations (1,092,000 versus 1,065,000 expected), single family permits declined sharply; there’s no way to spin this report as positive.
While it’s possible the entire economy is sliding into a massive housing-led recession based on the horrible print, we think there’s a simpler explanation: the weather. This is a well-trodden trope, and we don’t bring it out lightly. That said, there are very good reasons to apply it to this data. Below, we show snowfall totals for each Census region this winter versus the average of the prior three years. Totals are calculated by taking the average of each reporting station in the state for each day, then summing them. We then weight each state by its population as a share of each Census region; we care less about huge snowstorms in sparsely populated Wyoming than we do in dense Massachusetts. The result is clear: the Northeast region got absolutely pounded last month when it comes to snow. It was also the second-coldest month on record for 8 of 9 Northeast states. Put simply: this winter was brutal. That’s what drove the massive regional declines in the Northeast and to a lesser extent the Midwest.