By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — U.S. builders started work on new homes in March at slower pace, but the number of construction permits jumped to their highest level in 3 1/2 years in a positive signal for the slump-ridden industry., government data indicated Tuesday.
Housing starts fell 5.8% to an annual rate of 654,000 last month, well below the MarketWatch forecast of economists projecting an increase to 703,000. The data are seasonally adjusted.
Housing starts in February were also revised down slightly, to 694,000 from 698,000 previously.
However, building permits — a gauge of future demand — climbed 4.5% to 747,000 in March from a revised 715,000 in February, mainly because of a spike in requests to construct multi-dwelling buildings with five units or more.
The latest rise in permits suggests builders are becoming increasingly optimistic after the industry’s worst slump in modern times. Multi-dwelling permits jumped 24.2% to 262,000 for that often-volatile category.
Conversely, permits for single-family homes, which account for about three-quarters of the market for new housing, dipped 3.5% to 462,000 — an indication that builders still face pressure from a deluge of foreclosed homes on the market.
By region, new construction sank nearly 16% in the South, accounting for the entire drop last month. Housing starts shot up almost 33% in the North, edged up 1% in the Midwest and were unchanged in the West.
Over the past 12 months, housing starts are up 10.3%. New construction of single-family homes has risen a slightly faster 10.5% in that span.
Most economists expect the housing market to improve throughout the course of the year. The industry could even add to U.S. economic growth for the first time since the 2008-2009 recession.
Even at current construction rates, however, building is still well below the norm. In a healthy economy, housing starts should average 1.5 million or more each year, analysts estimate.
The effects of a healthy housing industry are widespread. Large amounts of raw materials and finished goods are required to build homes and furnish them after sale, and the construction trade employs millions of workers directly or indirectly.
Because of sharp fluctuations in housing starts data, economists say it can take several months to detect new trends. In the past three months, housing starts have averaged an annual rate of 687,000, up 18% from 582,000 for the same span in 2011.
Jeffry Bartash is a reporter for MarketWatch in Washington.
