Housing Starts Increase More than Expected

Economists got a jolt Tuesday, when February housing starts came in much stronger than expected:

Privately-owned housing starts in February were at a seasonally adjusted annual rate of 583,000. This is 22.2 percent (±13.8%) above the revised January estimate of 477,000, but is 47.3 percent (±5.3%) below the revised February 2008 rate of 1,107,000.

But don't get too excited, say economists at Goldman Sachs:

This is unlikely to be the harbinger of a sustained turn in the sector as it simply reverses recent large declines and inventories remain high. The 22.2% increase follows declines of 14.5% and 14.8%, so the level of housing starts is only about equal to that in December. Moreover, the increase was concentrated in the volatile (and lower value added) multi family sector, which surged 82%. Single family starts rose just 1 percent.

Confirming a somewhat pessimistic reading of the bounce, permits barely moved; these increased just 3%. A possible explanation for the pattern is that bad weather in January followed by better weather in February helped to push starts into February.