February housing starts disappointing but expected to be temporary

16 March, 2018

Scott Volling
Partner, PwC US

After a hot start to the year with January housing starts and permits blowing away expectations, both numbers for February came in below expectations. Permits were 1,298,000, slightly below the consensus of 1,322,000 but still a relatively strong number and 6.5% higher than last year. However, February starts disappointed at 1,236,000, 3.8% below the consensus of 1,285,000 and 4% below last year’s number of 1,288,000.

While we weren’t expecting the same sizzling results as January, expectations were high as February is historically a strong month for starts. While some of the drop in starts can be attributed to weather in the northeast, the biggest drop occurred in the West, which is a bit surprising. Interestingly, one of the numbers that stands out for February is the rate of completions, coming in at a ten-year high of 1,319,000, which also follows a strong January as well. The historically high rate of completions may be an indication that builders are prioritizing in-flight completion velocity over new starts while they make longer term adjustments around production flow and product mix to weight more heavily the first time buyer and entry level demographics. If so, and with five straight months of strong permit results, the dip in starts this month should be temporary.

Single family starts came in at 902,000, up 2.9% from the 877,000 number registered both last month and February of last year. The volatile multi-family number was 317,000, 28% lower than last month and 19% below February of last year.