US Housing Market Starts Fall Below Expectations

Like all other sectors of the economy, the housing sector continues to weaken as coronavirus threats continue to increase. The US homebuilding experienced a sharp drop in February following a decline in the construction of multifamily housing units. There is no telling how soon it would recover as the coronavirus pandemic continues to surge.

The Commerce Department, on Wednesday, reported that in February, housing starts declined 1.5% to a seasonally adjusted annual rate of 1.599 million units—99 units short of what economists had forecasted for February. Whereas, in January the statistics were higher with homebuilding rising to 1.624 million.

Over time, the US housing market put in extra efforts to regain its place in the economy after mortgage rates plunged from the first quarter of 2018 through the second quarter of 2019.  The recovery was followed by multiple constructions. However, the recovery has since been stagnated due to the current pandemic that is raging markets globally.

In February, housing starts shot up 39.2% on a year-on-year basis, and building permits plunged 5.5% to a rate of 1.464 million units. Single-family homebuilding jumped 6.7% to a rate of 1.072 million. It’s starts increased in the Northeast, Midwest, and the South, but didn’t perform well in the West. The single-family housing building permit also increased 1.7% to a rate of 1.004 million units.

Michael Speakman, an economist at Zillow concerning the housing market plunge said, “February’s home construction release can be viewed as the calm before the storm and a kind of measuring stick for where builder activity stood just before the US coronavirus outbreak began in earnest.

“A sharp upward revision to initially reported starts data from January and an almost equally strong February could indicate that builders were in a bit of a rush to get some projects off the ground before the coming coronavirus storm,” he said.

The multi-family house building has since been volatile since the pandemic, increasing to 1.7% to a rate of 1.004 million units also in February. While starts for multiple units dropped 17.0% to a rate of 508,000 units. Permits for this category of buildings dropped 20.2% to a rate of 415,000.

In spite of the stats, homebuilders remain hopeful that March would be a lot better. Although, many economists have predicted a recession to hit the US between late March and April. A housing data was released on Tuesday and it “suggests that while homebuilder confidence remained near all-time highs as recently as early March, concerns over the industry’s vulnerability to the emerging coronavirus outbreak had already begun to mount even before the disease reached the US soil,” according to Speakman. He yet encouraged homebuilders to stay hopeful in spite of the coronavirus threats as demand could jump as the pandemic phase ends.