Housing starts slumped in February by the most in four years as bad winter weather in parts of the U.S. prevented builders from initiating new projects.
Work began on 897,000 houses at an annualized rate, down 17% from January and the fewest in a year, the Commerce Department reported Tuesday in Washington. The median estimate of 80 economists surveyed by Bloomberg called for 1.04 million.
"It was just the weather, basically," said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Ala. Still, "my view of the recovery in single-family housing is that it's coming more gradually than others think."
An increase in building permits was driven by applications for multifamily units, indicating single-family construction, the biggest part of the market, will keep struggling. While stronger hiring and low borrowing costs have helped the industry advance, sales remain challenged by limited supply of cheaper homes and sluggish wage growth.
The median estimate of 81 economists in the Bloomberg survey called for 1.04 million starts. Estimates ranged from annualized rates of 975,000 to 1.08 million after a previously reported January pace of 1.07 million.
Building permits climbed 3% to a 1.09 million annualized pace, the fastest since October, after a 1.06 million rate a month earlier. They were projected at 1.07 million, according to the Bloomberg survey median. Permits for single-family dwellings were the lowest since May.
Stock-index futures held losses after the figures. The contract on the Standard & Poor’s 500 Index maturing in June dropped 0.3% to 2,063.3 at 8:50 a.m. in New York.
Starts of single-family properties dropped 14.9% to a 593,000 rate in February. Construction of multifamily projects such as condominiums and apartment buildings decreased 20.8% to an annual rate of 304,000.
New construction slumped a record 56.5% in the Northeast and fell 37%, the most since January 2014, in the Midwest. Starts also dropped in the South and West, indicating weather was only partly to blame.
The report corroborated data on Monday that showed
Last month, the Eastern Seaboard saw below-normal temperatures from Atlanta to New York and record snowfalls in New England. The National Oceanic and Atmospheric Administration's data showed the snowiest month on record for Boston, while record-low temperatures for any February were reached in Chicago, Buffalo and Cleveland.
Cheap borrowing costs are keeping homes affordable for some Americans. The average 30-year, fixed-rate mortgage was 3.86% in the week ended March 12, according to data from Freddie Mac. That's below the average 4.26% rate since the expansion began in June 2009.
Greater employment opportunities are providing support for the housing industry as well. The economy added 295,000 workers last month, more than forecast, and the unemployment rate dropped to 5.5%, the lowest in almost seven years.
