Before the Coronavirus pandemic tightened its grip on the U.S. housing market, home construction began to ease in February led by a retreat in multifamily units.
The nation’s housing starts fell 1.5% in February to a seasonally adjusted annual rate of 1.599 million, remaining 39.2% above 2019’s levels, according to a Commerce Department report on Wednesday.
“February’s home construction release can be viewed as the calm before the storm and a kind of measuring stick for where builder activity stood just before the U.S. coronavirus outbreak began in earnest,” said Matthew Speakman, a Zillow economist. “A sharp upward revision to initially reported starts data from January and an almost equally strong February could indicate that builders were in a bit of a rush to get some projects off the ground before the coming coronavirus storm.”
In February, single-family housing starts grew 6.7% from January to 1.072 million units while multifamily starts declined 17% to 508,000 units, according to the report.
Permits fell 5.5% to a seasonally adjusted annual rate of 1.464 million, which is 13.8% above the February 2019 rate of 1.287 million. Single-family permits increased 1.7% to 1.004 while multifamily permits decreased 20.2% to 415,000.
Single-family completions grew 14.1% to 1.027 million in February, while multifamily completions declined 31.4% to 280,000.
“Data released Tuesday suggests that while homebuilder confidence remained near all-time highs as recently as early March, concerns over the industry’s vulnerability to the emerging coronavirus outbreak had already begun to mount even before the disease reached U.S. soil,” Speakman said. “But while data in the coming months is sure to take a step back, the outbreak and the uncertainty that surrounds it presents an interesting problem for builders.”
According to Speakman, while the historic shortage of for-sale homes is unlikely to get much better as this crisis persists, demand could reignite as the pandemic passes.
“This presents a conundrum for builders who will undoubtedly be trying to determine the best time to apply for new permits and/or resume construction so that homes are ready to sell once the market comes back,” he said. “The coming months will very likely be tough sledding for builders, but longer-term market dynamics might result in some better-than-expected readings on the other side of this crisis.”