Devil in the details of the February starts a…

We just got a look at home construction activity in February. The devil is really in the details here, so allow me to
explain:

* Overall housing starts came in hotter than expected — 1.065 million units at a
seasonally adjusted annual rate. That was above the 995,000 units that the markets were looking for. Moreover,
January’s number was upwardly revised to 1.071 million. But starts are still down 28.4% from a year ago (and 53.5% from
their January 2006 peak of 2.292 million). Also …

* Building permit issuance dropped sharply — from 1.061 million units in January to just 978,000 last month. That’s
the lowest level since September 1991 (974,000), down 36.5% from the year-earlier level, and off 56.8% from the peak
(2.263 million units in September 2005). Since permit issuance is an indicator of future construction, we will likely
see starts fall further.

* Now, let’s dig even deeper into the starts figure. When we do, we see that the strength was in the more volatile
multi-family market. Specifically, multiple-unit starts were up 14.4%. Single-family home starts, on the other hand,
dropped sharply again — 6.7% on the month to 707,000 from 758,000 a month earlier. That leaves SF starts at the lowest
level since January 1991 (604,000).

* And what about permitting? There, the news was bad for both MF and SF — down 10.8% on multi-family permits and 6.2% on single-family.

Bottom line: Yes, the report was “better than expected.” But no, it doesn’t show an end to the slump in the
single-family home market.