WASHINTON - Builders began work on fewer homes than forecast in March, signaling a sustained industry recovery will take time to get underway.
Housing starts dropped 5.8 percent to a 654,000 annual rate, less than the lowest estimate of economists surveyed by Bloomberg News and the least since October, Commerce Department figures showed today in Washington. The slump was led by the volatile multifamily category, which at the same time showed a jump in permits, a proxy for future construction.
While warmer weather may have spurred home construction at the beginning of 2012, a competing supply of cheap existing properties may be steering potential buyers away from purchasing a new home. That means home construction may not help boost the economy in 2012.
“Housing continues to bump along the bottom,” said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York. “The best we can hope from housing over the next couple years is that it won’t subtract from growth. The numbers in the past few months were decidedly impacted by a much milder winter, so a significant portion of construction was pulled forward.”
Stock-index futures held earlier gains after the report as concern about Europe’s sovereign debt crisis eased. The contract on the Standard & Poor’s 500 Index maturing in June climbed 0.6 percent to 1,371.7 at 8:42 a.m. in New York.
The median forecast in the Bloomberg survey called for a 705,000 rate. Estimates from the 82 economists ranged from 670,000 to 750,000. February’s building pace was revised to 694,000 from a previously reported rate of 698,000.
Building permits climbed 4.5 percent to a 747,000 annual rate in March, the highest level since September 2008. They were projected to drop to a 710,000 annual rate. Applications for multifamily units increased 21 percent, while those for single- family houses, which account for about 70 percent of the market, dropped 3.5 percent.
Construction of single-family houses eased 0.2 percent to a 462,000 rate. Work on multifamily homes, which include townhouses and apartment buildings, dropped 17 percent to an annual rate of 192,000. The decrease followed gains of 13 percent and 17 percent in the prior two months.
The decrease in starts was focused in the South, where builders began work on 16 percent fewer houses. Construction was little changed in the West and rose 33 percent in the Northeast and 1 percent in the Midwest.