Housing starts declined in February following a strong month in January that was aided by unseasonably warm weather. Homebuilding fell 1.5% to a seasonally adjusted annual rate of 1.59 million units in February, according to the latest report released by the Commerce Department on Wednesday. January data was revised higher from 1.56 million units to 1.62 million units, and starts soared 39% annually in the 12 months through February.
- February Housing starts came in at 1.59 million units vs. 1.5 million expected, down from 1.62 the month before.
- The coronavirus pandemic is likely to create further strain on the housing market, and another drop is expected for March.
- Permits, an indicator of future construction, were at 1.46 million when last measured, 5.5% below January figures.
Housing declined less than expected in February, with the headline figure close to the expected drop. After a month of unexpectedly warm weather which provided favorable conditions for construction workers in January, February homebuilding slowed down to a rate of 1.59 million units. While the monthly figures show a mild drop, homebuilding is actually up 39.2% from February 2019.
Permits for future construction also saw an overall drop of 5.5%, indicating a mild slowdown in future construction. However, March permits may reflect a more extreme drop in homebuilding and permits due to the recent escalation in the coronavirus outbreak, now classed as a global pandemic. In the single-family homebuilding category, permits rose 1.7% from 987,000 to 1 million. Permits for multi-family homes came in at 451,000 last month. Single family housing starts rose 6.7% to 1.07 million, while starts for multi-family homes came in at 508,000.
— Bill McBride (@calculatedrisk) March 18, 2020
Coronavirus Impact on Housing Market
With the economy veering towards recession, the coronavirus pandemic is likely to have a negative impact on the US housing market. While lower interest rates are good for buyers, the housing market as a whole is supported by a base of renters and buyers with stable income streams.
Google trends data shows a sharp spike in the number of people in the US searching for solutions to being unable to pay rent, and layoffs have already surged throughout the US, with tens of thousands of people now out of work due to the pandemic.
Estimates of the impact vary. Economic Policy Institute director Josh Bivens estimates that 3 million jobs will be lost by summer, while the US Travel Association projects that 4.6 million jobs will be lost this year in the travel industry alone. This would push the US unemployment rate to 6.3%, and negatively impact housing as well as all other aspects of the US economy.
Gold prices have ticked downward following the mixed construction data from the Commerce Department. Spot gold last traded at $1,509.10/oz, down -1.04% with a high of $1,544.12 and a low of $1,488.92/oz. The markets are likely being influenced more by the coronavirus pandemic than by broader economic reports such as the homebuilding report, which was measured over a period before the outbreak severely escalated. Gold is now hovering just above crucial support at $1,500 as the markets continue to see volatility midst the uncertainty of the current economic situation.