Implications: Housing starts fell for the second month in a row in February, largely the result of harsh winter weather across much of the country, which impeded construction activity. Given that February's job's report from earlier this month showed the construction sector had shed 61,000 jobs, the first decline in 10 months, the weakness in today's report wasn't surprising. The decline in housing starts was also broad-based, with every region outside the West and both single-family and multi-family construction posting declines. That said, we anticipate a return to the upward trend in housing starts very soon, led higher by single-family homes. Why the confidence? First, despite a 10.8% decline in February, building permits for future construction remain near the highest level since 2006. Moreover, permits have now outpaced new construction for seven consecutive months. This has resulted in a backlog of projects that have been authorized but not yet started, which is now the largest in nearly 15 years. So, with plenty of future building activity in the pipeline and builders looking to boost the inventory of homes as well as meet consumer demand, look for both overall and single-family starts to post even higher highs in 2021. This positive outlook is reinforced by yesterday's read on the NAHB index, a gauge of homebuilder sentiment, which fell to a still-elevated reading of 82 in March from 84 in February. The decline was largely driven by rising materials costs, especially lumber, another signal of ongoing inflationary pressure as the US begins to reopen.
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Posted on Wednesday, March 17, 2021 @ 12:30 PM