• U.S. housing starts retreated by 1.5% to 1.59 million units (annualized) in February. The pull-back was milder than the 4.3% decline markets had expected, likely helped by a spell of unusually warm temperatures. Today’s release also came with revisions to the December 2019 and January 2020 prints (+32k on net).
  • The decline was concentrated in multi-family starts, which plunged by 14.9% to 527k units, ending four consecutive monthly gains. Single-family starts advanced by 6.7% to 1,072k units, more than reversing the losses from the month prior.
  • Permits retreated on the month, falling by 5.5% to 1.46 million following a solid 9.2% increase the previous month. Multi-family permits pulled back by a whopping 18.3%, the largest monthly decline since July 2019. Single family permits, on the other hand, were up 1.7% and extended their winning streak to ten consecutive monthly gains.
  • The regional outturn was mixed bag with starts advancing in two of the four major regions and retreating in the other two. Double-digit gains in the Midwest (+16.7%) and the South (+15.2%) were cancelled out by larger declines in the Northeast (-41.4%) and the West (-18.2%).

Key Implications

  • Despite the decline, the February housing starts print was better than anticipated, particularly considering the upward revision to the January data (+1.4% vs -3.6% previously). A relatively warm winter was likely a factor in providing additional momentum to housing starts to begin the year, which will be much needed as the housing sector braces for the impact of the coronavirus outbreak.
  • Indeed, as the pandemic works its way through the U.S. economy, expect construction activity to ease further in the months ahead. Already, builder sentiment has started to slip from recent highs, with sales expectations and traffic of prospective buyers both down in March. This trend will likely worsen as containment efforts and social distancing intensify over the near-term.
  • The good news is that, for now, the longer-term trend remains firmly on an upward trajectory for U.S. housing starts. As noted in our recently released Quarterly Economic Forecast, lower mortgage rates will eventually feed through the economy and, as the situation normalizes, will support demand in the housing sector, providing a fillip to construction.


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