Housing Starts Tumble
By Tom Barkley and Jeff Bater
The Wall Street Journal
March 16, 2010
Home construction tumbled in February, with major snowstorms crippling business already hobbled by foreclosures.
Housing starts decreased by 5.9% to a seasonally adjusted 575,000 annual rate compared to the prior month, the Commerce Department said Tuesday.
While that was the biggest decline in four months, it followed an upward revision in the previous month's data, when starts staged a 6.6% gain. January starts were originally reported up 2.8%.
February's homebuilding activity remained above the level of 573,000 registered in December. Economists surveyed by Dow Jones Newswires forecast a 4.7% drop in February housing starts, to an annual rate of 563,000.
Breaking down the figures on starts, construction of single-family homes starts decreased 0.6% from the prior month to 499,000.
Apartment groundbreakings -- housing with two or more units -- slid 30.3%, to 76,000. Within that multi-family category, starts of homes with five or more units registered their biggest drop since January 1994, falling 43.1% at 58,000.
Harsh winter weather in the East and South made it tough for builders to work part of the month.
Meanwhile, demand for new homes remains depressed, with the latest data showing sales plunged 11.2% in January. Those brave enough to ignore high joblessness and lucky enough to get a loan are passing up on new homes for cheaper used property. But the low prices, driven down by foreclosures, make it harder for new-home customers to sell existing houses and, therefore, hurt demand and construction.
The National Association of Home Builders on Monday reported U.S. homebuilder confidence fell a fourth time in six months, slipping to 15 in March from 17.
"Builders of new homes are simply having a very difficult time competing against 'nearly new' homes being dumped on the market by burned speculators and banks," Weiss Research analyst Mike Larson said following the NAHB report.
Building permits, an indication of future construction, fell 1.6% to a 612,000 annual rate.
Economists had expected permits to decline 3.1% to a rate of 603,000. January permits fell 4.7% to 622,000.
Regionally, housing starts last month varied significantly, with construction down 15.5% in the South and 9.6% in the Northeast. Starts were up 10.6 in the Midwest and 7.9% in the West.
Year over year, housing starts in the U.S. last month were 0.2% higher than the pace of construction in February 2009, which was the pit of the recession.
The Commerce Department said actual housing starts fell in February compared to the prior month, to 38,800 from 39,200. The unseasonally adjusted number is closely watched by the lumber and commodities markets as a sign of demand.
Import Prices Decline
The Labor Department said Tuesday that prices of goods imported into the United States dropped by 0.3% last month, after increasing a revised 1.3% in January.
Economists surveyed by Dow Jones Newswires had expected a 0.2% fall in import prices last month. The January reading of import prices was previously estimated to show a 1.4% gain.
With the U.S. economy's recovery more firmly in place, investors are starting to pay more attention to readings on inflation. Outside of volatile energy and food prices, there have been few signs that inflation is heating up, giving the Fed continued reason to keep interest rates at a record low.
Fuel import prices fell by a monthly 1.9% in February, following a 4.9% increase in January. A 2.2% decline in petroleum import prices was slightly offset by a 2.6% rise in natural gas prices.
Excluding petroleum, import prices were up 0.2% in February versus January. Excluding all fuels, import prices also rose 0.2% last month.
The Labor Department said import prices were up 11.2% for the year ended in February, moderating from an annual rise of 11.5% in January.
The latest figures should give the Federal Reserve continued ammunition to keep short-term rates close to zero. The Fed's policy-making arm is expected to keep rates at an historic low at a meeting later Tuesday, and to reitarate they're expected to stay at that level for several months amid continued low inflation and high unemployment.
Tuesday's import prices report showed that food prices edged down 0.1%, the first drop since July 2009. Falling vegetable and food oils were the primary contributors to the decline.
Lower fuel prices contributed to the February declines in import prices from Mexico and the European Union. Import prices from the EU were down 0.1%, while from Mexico they were 0.7% lower. Import prices from China and Japan fell by 0.1% last month.
Meanwhile, U.S. export prices fell by a monthly 0.5% in February, following a 0.7% rise in January.
The Fed will get more readings on inflation when the government releases the more closely watched February producer and consumer prices on Wednesday and Thursday, respectively. Economists expect the readings to show that the economy, while recovering, still has too much slack to allow price pressures to build. (Luca Di Leo and Darrell A. Hughes contributed to this article.)
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