Feb. housing starts slip 0.2%; permits surge

Housing starts steadied last month but building permits rebounded to levels last seen in the fall, the Commerce Department said Tuesday.

Builders started construction of new homes at a seasonally adjusted annual rate of 907,000. That's down 0.2% from January's revised estimate of 909,000. The government's previous estimate was 880,000.

February's level was close to economists' median forecast of 910,000 in Action Economics survey. But it's a slowdown from the 1-million-plus annual pace in November and December.

Housing starts increased in the South and Midwest last month, but slowed in the Northeast and West.

Permits, a gauge of future construction, ran at an annual pace of just over 1 million, a 7.7% increase from January and the highest level since October. The gain was all in multifamily housing, where permits have climbed to mid-2008 levels. But permits for single-family houses fell 1.8%, the third straight monthly decline.

The trend reflects a broader shift in housing construction market, observed economists for the Royal Bank of Scotland in a client note Tuesday.

Over the past 12 months, multi-unit homes accounted for 33.8% of starts and 36.8% of permits, the bank said. Seven years ago, before the recession, those shares were 19.1% and 26.0%.

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Other economists had mixed reactions to the report.

Joel Naroff, of Naroff Economic Advisors, said the pick-up in permits overall is a good sign for construction activity in the months ahead.

"Since builders generally don't pay the money for permits unless they expect to do something with them, you can bet that once the warm weather returns, so will the bulldozers," he said.

Richard Moody, chief economist of Regions Financial, said single-family starts and completions were rising at a slower pace so far this year than he had anticipated. "Builders continue to be pla! gued by shortages of lots, labor, and materials and unless and until these constraints begin to ease, any rebound in single family construction will remain restrained," he said.

Those same concerns also were cited Monday in the National Association of Home Builders' statement on its builder sentiment survey for March.

The NAHB/Wells Fargo index rose to 47 from 46 in February while builders' expectations for the next six months weakened by a point to 53. Readings below 50 indicate more builders view sales conditions as poor rather than good.