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March 17, 2006: Housing Starts Show Signs of Cooling in February

March 17, 2006
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WASHINGTON - Following the warmest January on record that helped spur a 16 percent jump in housing starts, the housing market showed signs of cooling in February, with total housing starts down 7.9 percent for the month to a seasonally adjusted annual rate of 2.12 million.

Single-family starts dipped 2.3 percent to 1.8 million units. Multifamily starts fell 30.4 percent to 320,000 units after posting a very high level of 460,000 units in January.

"The underlying market fundamentals remain solid," stated David Pressly, president of the National Association of Home Builders (NAHB). The February starts numbers "are another indicator that points towards an orderly cooling down process for the housing market in 2006."

"So far this year, housing starts have received a boost from unusually mild winter weather, even in February, and we expect to see these numbers move further down in the months ahead," said David Seiders, NAHB chief economist. "Indicators that measure housing demand - home sales, applications for home mortgages, and our own survey of single-family builders - show that the cooling process has begun. Furthermore, single-family permits, which are less affected by weather than single-family starts, have been trailing down gradually from their highs last fall."

Seiders added that the evolving slowdown is actually a healthy development and should not lead to any major contraction in the housing market.

"Last year's record-level of housing starts and double-digit price appreciation were unsustainable, and encouraged many investors and speculators to enter the market," he said. "With demand slowing, we expect to see price appreciation also falling back into the single-digit range, and that will discourage short-term speculators from jumping into the market. We anticipate another solid year for housing in 2006, with new-home construction and new home sales down about 7 percent from last year's all time highs."

Regionally, construction of new homes and apartments for the month was down 23.5 percent in the Northeast, 10.4 percent in the Midwest, and 11.2 percent in the South. Starts posted a 7.9 percent gain in the West.

Issuance of total building permits fell 3.2 percent to a seasonally adjusted annual rate of 2.15 million units in February. Single-family permit issuance was down 3 percent to 1.64 million units while multifamily permit issuance registered a 1.1 percent gain to 532,000 units.

Publication date: 03/13/2006

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