Housing starts rebound - don't get too excited

The Commerce Deparment reported(.pdf) that housing starts rose for the first time in eight months, up 22.2 percent in February from record lows in January, largely as a result of a rebound in condominium and apartment building.
While a 22 percent gain sounds impressive, it is important to recall just how low last month's record low numbers were.

Housing starts rose from an annualized, seasonally adjusted rate of 466,000 in January to a rate of 583,000 last month, but the January totals were a full 42 percent below the previous record low of 798,000 in January of 1991, a rate that is not adjusted for the increase in population.

This data series goes all the way back to 1959 and to see the rate of housing starts averaging well over a million units for five decades gives the February figure of 583,000 a very different connotation than when simply comparing the total to January.

On a year-over-year basis, housing starts fell 47.3 percent.

Building permits, a forward looking indicator for new construction, rose 3.0 percent in February, from a rate of 521,000 to 547,000, and are now down 44.2 percent from a year ago.

Record foreclosures and an increasing number of sales of bank owned properties have undercut builder prices for many months now with almost 300,000 homes entering some stage of foreclosure in February. This adds to the growing inventory of bank owned properties, most of which have remained off of the resale market according to RealtyTrac, a California-based provider of default data.

Yesterday's National Association of Home Builders housing market index remained near record lows, buyer traffic worsening in the latest report, as the near-term outlook for homebuilders remains grim.