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March 19, 2003: Housing Starts Decline In February

March 19, 2003
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WASHINGTON — The U.S. Department of Commerce has reported an 11 percent decline in housing starts from January's seasonally adjusted annual pace of 1.82 million starts to a 1.62 million unit pace in February. The National Association of Home Builders (NAHB) attributed the drop to unusually cold and wet weather across much of the nation, combined with economic and job market weakness, and expectations of war in Iraq.

On the other hand, residential building permits — an indicator of future building activity —moved up slightly to a solid rate of 1.79 million units.

"Builders are being careful to avoid any significant overhang in their inventories of unsold homes, and are wisely ratcheting down the pace of new construction to a rate that's more sustainable under the current conditions of economic and geopolitical uncertainty," said Kent Conine, president of the NAHB.

David Seiders, NAHB’s chief economist, noted that the fundamentals of the housing market remain basically solid. "Given the strong permit numbers we are seeing, the tight inventory situation, healthy house-price performance, and especially the favorable interest-rate picture, home builders are in good position to pick up the pace of housing production as today's economic and political uncertainties head toward resolution. Assuming the best scenarios of a decisive and relatively quick end to the dispute in Iraq and an anticipated fiscal stimulus package, we're still looking at a year-end housing production figure very close to last year's exceptional 1.7 million units."

The slowdown in February occurred in the single-family sector, where starts decreased 13.7 percent to a seasonally adjusted annual rate of 1.3 million units. "Keeping things in perspective, this is just shy of the stellar 1.36 million unit rate of single-family housing production gauged for all of 2002," Conine stated. Meanwhile, the pace of multifamily housing production appeared unaffected by the latest news, posting a 2 percent gain in February to a rate of 327,000 units.

Publication date: 03/17/2003

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