You can almost hear a collective sigh of relief.
After this morning’s update on housing starts for February, there’s reason to think that a thin ray of optimism is in order when it comes to pondering real estate for 2007. It may be fleeting, but for a few hours, at least, hope has a new lease on life.
The source of the cheer comes by way of the Census Bureau, which reported today that new privately owned housing units rose by 9% last month over January, based on a seasonally adjusted annual rate. In raw numbers, that translates into 1.525 million new starts in February. As the chart below shows, that delivered a much-needed bounce to the battered housing market.
Clearly, it’s too early to say that all’s well. Even after last month’s pop, it’s not yet clear that the decline that began more than a year ago has bottomed out. Nonetheless, there are other reasons to be cheerful with today’s report, including the fact that the housing starts total delivered a substantial upside surprise compared to the consensus forecast, which predicted 1.440 million units, according to TheStreet.com.
Another bit of encouraging news can be found in the housing-start numbers for the South and West. The harsher winter conditions in the Northeast and Midwest inevitably slow housing related activities. By contrast, the weather is much less of a stumbling block in the South and West. As such, focusing on those areas may offer a better picture of the underlying trends for housing. With that in mind, consider that new housing starts surged 26.4% in the West last month over January; in the South, starts climbed by 18%.
As the last major economic update before the Fed’s FOMC speaks publicly tomorrow afternoon, the housing starts report offers one more reason to think that a cut in interest rates is off the table of possibilities. But while this morning’s news is encouraging, the real estate ills aren’t necessarily over.
A closer reading of today’s housing report suggests that there’s still a fair degree of weakness in the real estate market beyond housing starts. For example, while housing starts jumped 9% last month, today’s report shows that:
* New building permits issued fell 2.5% last month from January’s pace (based on a seasonally adjusted annual rate, as are all numbers below).
* The number of new privately owned housing units under construction last month fell 0.7%.
* New privately owned housing units completed slipped 9.4% in February.
One report doesn’t mean much in the grand scheme of the economy. Then again, optimism and pessimism, bull and bear markets, are created one data point at a time. And for today, at least, the optimists and bulls have a few new reasons to cheer.