House construction off 3.9% in March 16% decline in West biggest drop in a year

April 18, 1996|By KNIGHT-RIDDER FINANCIAL NEWS

CHICAGO -- A large drop in home construction in the West helped push U.S. housing starts down 3.9 percent in March to a seasonally adjusted annual rate of 1.447 million units, the Commerce Department said yesterday. The decline was the sharpest in a year.

The drop follows a revised 3.6 percent rise in February to a 1.505 million-unit rate, the highest since May 1994. February starts had been reported as up 3.0 percent.

Single-family housing starts fell 1.4 percent to a rate of 1.159 million units in March. They rose a revised 2.5 percent the month before, previously reported as up 2.6 percent.

March housing starts in the West posted their biggest drop in a year, 16.1 percent. Starts fell 2.3 percent in the South. Multifamily-housing starts fell 12.7 percent after a revised 7.5 percent gain in February. The declines were partially offset by a 10.2 percent rise in housing starts in the Northeast, and a 3.5 percent gain in the Midwest.

Because the 3.9 percent drop in March housing starts -- the sharpest in a year -- was mostly concentrated in the volatile multifamily sector, it was viewed as only a slight drop overall, economists said. They forecast a rate of 1.45 million units, within a range of 1.4 million to 1.51 million.

The 12.7 percent drop in multifamily starts drove down the overall rate of housing starts, said David Lereah, chief economist with the Mortgage Bankers Association.

The 1.4 percent drop in single-family starts showed that activity remained fairly strong. The total effect was a slight drop, pretty much as expected, he said.

"Anything above 1.4 million units [overall] is still relatively healthy," Mr. Lereah said.

David Berson, chief economist with the Federal National Mortgage Association, also said the drop was in line with expectations.

"It came in the multifamily sector, where we were looking for it," Mr. Berson said. Multifamily construction had been at an unsustainable pace in recent months, he added.

Economists had expected that rising interest rates would push down housing starts and had been skeptical of the strength of the February data.

The slight upward revision in February, to 1.505 million units from 1.49 million, was a surprise to Christopher Low, economist with HSBC Group.

The revision to the February number was stronger than expected, he said.

"The weather in February wasn't that much better than in January," Mr. Low said, "so to find out February was revised higher was a surprise."

Pub Date: 4/18/96

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