U.S. Housing Starts Pull Back Sharply In March, Permits Unexpectedly Drop

(RTTNews) - After reporting a sharp increase in new residential construction in the previous month, the Commerce Department released a report on Tuesday showing that U.S. housing starts pulled back by much more than expected in March.

The report said housing starts tumbled by 8.8 percent to an annual rate of 1.089 million in March after jumping by 6.9 percent to a revised 1.194 million in February.

Economists had expected housing starts to dip by about 0.9 percent to a rate of 1.167 million compared to the 1.178 million originally reported for the previous month.

With the steeper than expected pullback, housing starts gave back ground after reaching a five-month high in February.

Single-family housing starts plunged by 9.2 percent to a rate of 764,000, while multi-family starts slumped by 7.9 percent to a rate of 325,000.

Building permits, an indicator of future housing demand, also dove by 7.7 percent to a rate of 1.086 million in March from a revised 1.177 million in February.

The decrease surprised economists, who had expected building permits to climb 2.8 percent to a rate of 1.200 million from the 1.167 originally reported for the previous month.

The unexpected decrease was primarily due to a steep drop in multi-family permits, which plummeted by 18.6 percent to a rate of 359,000. Single-family permits slid 1.2 percent to a rate of 727,000.

Despite the monthly decrease, housing starts in March were up by 14.2 percent compared to the same month a year ago. Building permits were also up by 4.6 percent year-over-year.

Rob Carnell, Chief International Economist at ING Commercial Banking, said the disappointing housing data raises further questions about the direction of the economy.

"We feel the evidence for recession is quite circumstantial, with both weak and strong patches within the U.S. economy," Carnell said. "But one of those stronger patches has been the U.S. home building sector, and this has taken a big dent in March."

On Monday, the National Association of Home Builders released a separate report showing that homebuilder confidence remained unchanged in April.

The report said the NAHB/Wells Fargo Housing Market Index came in at 58 in April, unchanged from March. The index had been expected to inch up to 59.