Global Investor

US housing slows

Gurumurthy K | Updated on March 23, 2014

PO24_GI_Data.eps

But new building permits rise



Is the worst over for the US housing sector? Data released last week presents a mixed picture. The slowdown in housing starts (commencement of new residential projects) and existing home sales are raising concerns, but a sharp rise in the number of new building permits issued kept hopes of a recovery alive.

The unusually cold winter this year has slowed down the start of new residential constructions. Housing starts in the US fell for the third consecutive month in February, the first continuous three-month fall since 2009. In February, it dropped 0.2 per cent in comparison to the previous month, falling to 907,000 units. On a year-on-year basis, housing starts fell for the first time since September 2011 to 6.4 per cent in February 2014. Housing starts are considered a critical indicator of economic strength, with more people likely to buy homes in a strong economy and less in a weak one.

Rising prices led to a drop in sales of existing homes in February. Sales fell 0.4 per cent to 4.6 million units from 4.62 million in January. They had peaked at 5.38 million units in July 2013, but have fallen by 14.5 per cent since then.

The only breather last week came from building permits data. The number of new building permits issued, which declined for three consecutive months after November 2013, picked up sharply in February.

Permit issuances rose 7.7 per cent on a monthly basis and 6.9 per cent year-on-year to 1,018,000 units. New home sales rose 9.6 per cent in January and the market is awaiting the February data release on Tuesday.

Published on March 23, 2014

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