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.”

New Construction

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.

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.

Regionally, housing starts maintained an even, but relatively slow pace of 142,000 units in the Northeast and fell in each of the other three sections of the country in February.

The Midwest posted the largest decline, with a 19 percent slowdown from January’s pace to a 282,000-unit rate, while the South reported a 9.4 percent decline to 742,000 units and the West showed an 11 percent decline to 456,000 units.

“After January’s phenomenal production pace — more than 1.8 million units — it was inevitable that some retraction would occur as builders caught their breath and waited out some of the worst winter conditions we’ve seen in a long time this February,” Conine said. “But with significant weakness in the national job market, eroding consumer confidence and war jitters added to the equation, builders put the brakes on a little heavier than would otherwise have been expected.”


Building permits, which can be an indication of future building activity, held firm with a four-tenths of a percent gain to a very solid 1.79 million-unit rate in February. Single-family permits fell 6.8 percent to a 1.32 million-unit rate, which is on pace with the 1.32 million single-family permits issued in 2002.

Meanwhile, multifamily permits rebounded strongly from a big dip in the previous month for a 28 percent gain in February to 471,000 units.

Publication date: 03/24/2003