Total Housing Starts Decline in March

The seasonally adjusted annualized rate of building permits let for new housing construction nationwide fell for the first time in the past five months during March. The annualized rate of 1.599 million units permitted in March was 9.9% lower than the revised February total, bringing the permit pace down to the level it was at during November of last year. The March 2002 permit total was 1.1% lower than during the same month of 2001.

The permit pace declined in March for all four broad regions of the country, and for both single-family and multifamily construction. From February to March, the single-family home permit volume was off 10.2%, while the pace of multifamily work permitted declined by 8.6%. The West held up the best during March, losing 2.9% from the February permitted pace. Permit volume declined moderately in the Midwest (-10.0%) and South (-9.4%), but plunged in the Northeast (-26.3%).

The annualized pace of total housing starts also eased from February to March. Total starts declined 7.8% in March to a seasonally adjusted annualized pace of 1.646 million units.

New single-family homes were started at a rate 11.4% less in March than during February. But new multifamily construction starts rose by 8.9% after a very weak February. Total March 2002 starts (after seasonal adjustment) were 3.4% higher than in March 2001, with the single-family sector coming in 7.9% healthier than a year ago, but the multifamily sector showing an over-the-year loss of 10.7%. During the first quarter of this year, total housing starts were estimated to be at a level 5.1% greater than during the first quarter of 2001. Although the multifamily sector failed to grow (declining a negligible 0.3% from the first quarter of last year to the first quarter of 2002), starts of single-family homes increased by 6.6%.

The starts pace declined in all regions except the Northeast (+15.4%) from February to March. Compared with March 2001, the level of starts this March was higher in all regions: Northeast (+5.8%), West (+4.6%), South (+3.1%) and Midwest (+1.5%).

Thirty-year fixed-rate mortgages carried an average interest rate of 7.01% this March, marginally higher than the 6.95% average of March 2001. On a monthly average measure, fixed-rate mortgages bottomed out during October of last year at a level of 6.62%. Adjustable-rate mortgages tied to the yield on one-year Treasury bills averaged an interest rate of 5.06% during March 2002, down just three basis points from the February average but sharply lower than the 6.28% average recorded during March 2001. For all of 2001, fixed-rate mortgages averaged 6.97% - versus an 8.06% average in 2000 - while adjustable-rate mortgages written during 2001 carried an average interest rate of 5.83%, much more affordable than the 7.04% average rate recorded the year before.

Single-family home sales remained reasonably healthy through the first quarter of this year. Total single-family home sales (at a seasonally adjusted annualized rate) were estimated to be only 1.8% lower in March 2002 than during the same month last year. But there's no escaping the fact that the market has lost momentum in recent months. During the five-month period beginning last October, over-the-year home sales had an average growth rate of 5.4% versus the over-the-year loss recorded this March.

Existing single-family homes sold at an annualized rate of 5.4 million units this March, according to the National Association of Realtors. This was 0.7% below the sales pace recorded during March 2001 but 9.5% lower than the record sales pace registered during the first two months of 2002. The median price of an existing home sold during March of this year was $153,000, while the average price of a resale was $192,400. These prices represented gains of 6.7% and 7.2%, respectively, over the levels for March 2001.

Sales of new single-family homes fell by 3.1% (on a seasonally adjusted basis of measure) from February to March, according to the U.S. Department of Commerce, after sharp increases during December and February. At a seasonally adjusted annualized rate of 878,000 new homes sold during March 2002, sales were 7.9% lower than in March 2001. The median sales price of a new home sold this March was $176,700, while the average price was $222,900. The median sales price was up 6.3% from a year ago, while the average price increased by 6.0% from March 2001 to March 2002.