Implications: Today's report signals that the housing sector was on strong footing heading into the Coronavirus Contraction. Although housing starts fell versus January, they came in substantially higher than the consensus expected. In fact, if it wasn't for the large upward revision to January – which now shows the fastest pace for starts in over thirteen years – February would've posted a gain. Further, all of the decline in starts in February was due to the volatile multi-unit sector; single-family starts jumped 6.7% and hit the fastest pace since 2007. Building permits show a similar story, sitting just below January's post-2007 high due to weakness in multi-unit permits, which fell 14.9% in February. Single-family permits rose 1.7% and are now at a post-recession high. Over the next couple of months there are bound to be disruptions in the housing sector as the coronavirus hits supply chains and public health measures affect construction crews. However, this has yet to be fully reflected in the NAHB index, a measure of sentiment among homebuilders, which fell to 72 in March from 74 in February. It's important to note that most of the March survey responses were collected before the effects of the Coronavirus started hitting markets, so expect large declines going forward. With mortgage rates having spiked 40bps in the past two weeks due to disruptions in the financial markets, and potential buyers being advised to stay home, activity is sure to take a hit in the short-term. That said, we expect a robust rebound when issues surrounding Coronavirus are resolved.
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