A reader rightly takes me to task for reporting bad news but ignoring good. He particularly mentions the rise in housing starts reported today. > Because I don’t work on Wall Street, I don’t react instantly to bits of data, or I try not to. The housing starts, by themselves, mean nothing, in my opinion.
“We’re inclined to write this off as a weather-related fluke for now,” wrote economists for Wrightson ICAP. “If the permits series can hold onto its gains in next month’s March report, though, we’ll take it as a sign that new construction has finally found a floor (albeit a very low one).”“We hold to the view that the level of housing construction is becoming so low in absolute terms that starts will bottom out in the months ahead,” wrote John Ryding and Conrad DeQuadros of RDQ Economics.Construction of new housing units had plunged 38% in the previous three months before February’s unexpected jump. Economists surveyed by MarketWatch had forecast a further drop to 456,000, despite an expected surge in multifamily construction.But despite February’s gain, housing starts are down 47% from a year ago, and are down 74% from the peak in early 2006. Permits are down 44% in the past year.Builders are trying to reduce their inventories of unsold homes as they face relentless competition from older homes thrown on the market by foreclosures or short-sales.“With new home sales still falling and the months’ supply at a record there is no reason for homebuilding to rise,” wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics.The mood of home builders’ has rarely been worse. The National Association of Home Builders reported Monday that its sentiment index was stuck at 9 on a scale of 1 to 100 in March. See full story.The government cautions that its monthly housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can’t be sure whether starts increased or decreased. In February for instance, the standard error for starts was plus or minus 13.8%. Large revisions are common.