Housing starts go up in February and no one knows why

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Multi-family homes (apartments) seem to be behind the comparatively big increase.

BBC: US new homes increase by quarter “The rate of construction of new homes in the US soared by almost a quarter in February compared with the previous month, official figures show.”
AP: Housing starts surge; wholesale prices edge up “Housing construction posted a surprisingly large increase in February, bolstered by strength in all parts of the country except the West.”
CNN: Housing starts unexpectedly surge “Initial construction of U.S. homes unexpectedly surged in February, after falling for eight months, according to a government report released Tuesday.”
Reuters: U.S. housing starts surge, inflation slower “New U.S. housing starts and permits unexpectedly rebounded in February, according to data on Tuesday that provided a rare dose of good news for the recession-hit economy and fractured housing market.”
Commerce Dept. release: “Privately-owned housing starts in February were at a seasonally adjusted annual rate of 583,000. This is 22.2 percent (±13.8%) above the revised January estimate of 477,000, but is 47.3 percent (±5.3%) below the revised February 2008 rate of 1,107,000.“

(Worth noting: The BBC says revised January numbers were 466K — they must be using metric numbers.)

While single-family units were essentially flat, multi-family buildings (5 or more units) increased by 80% to 212,000 from 118,000 in January. Which makes you think builders expect a lot of renting in the future. Not unreasonable but — what about all the stock that’s already out there? Doesn’t that sort of have to be turned into rentals for anyone to make any money on it?

Some analysts are putting about as much trust in these numbers as they are in the most Wall Street’s most recent dead-cat-bounce.

“With new home sales still falling and the months’ supply at a record, there is no reason for homebuilding to rise,” wrote Ian Sheperdson, chief U.S. economist at High Frequency Economics in a research note. “This is a temporary rebound, not a recovery.”

Although, in fairness, interpretations of what the numbers mean seem to depend on whether or not you’ve actually given up hope.

“That is an encouraging sign for the U.S. economy. It is good signal of what is to come. With the rally in equities we hopefully have seen a bottom for the economy here,” said Matt Esteve, foreign exchange trader at Tempus Consulting in Washington.

It is worth noting that those who actually build houses are still looking at the 47% year-to-year fall numbers rather than the one month up-tick.

Confidence amongst home builders was unchanged in March, according to a report issued by Wells Fargo and the National Association of Home Builders on Monday. The housing market index came in at 9 in March, as expected, following the previous reading of 9 in February. The index, which has a 22-year history, consists of three components. The sales expectations component was unchanged at 15 in March, while the component for present sales for single-family homes was also unchanged at 7. The component looking at traffic of prospective buyers fell two points to 9. Over the past three years, the index has fallen from 61 to a record-low reading of 8 in January 2009. A rating above 50 indicates optimism by home builders; a reading below 50 indicates pessimism. The all-time low prior to the current credit crunch was 19.

Constantine von Hoffman is a veteran business journalist and social media consultant. He write the blog CollateralDamage, a satirical look at marketing and business.