US housing starts fall less than expected in February

U.S. homebuilding fell in February, pulled down by a sharp decline in the construction of multifamily housing units, and could continue to weaken as the coronavirus pandemic disrupts economic activity.

Housing starts dropped 1.5% to a seasonally adjusted annual rate of 1.599 million units last month, the Commerce Department said on Wednesday. Data for January was revised higher to show homebuilding increasing to a pace of 1.624 million units instead of dropping to 1.567 million units as previously reported.

Economists polled by Reuters had forecast housing starts falling to a pace of 1.500 million units in February.

Housing starts jumped 39.2% on a year-on-year basis in February. Building permits tumbled 5.5% to a rate of 1.464 million units in February. Permits for future home construction surged to a rate of 1.550 million units in January, which was the highest level since March 2007.

The housing market has regained its footing as mortgage rates have declined after hitting a soft patch beginning the first quarter of 2018 through the second quarter of 2019.

That recovery is, however, likely to be interrupted by the coronavirus, which has upended life for Americans, leaving economists anticipating widespread job losses as well as a recession by the second quarter.

The Federal Reserve on Sunday aggressively slashed interest rates to near zero, pledged hundreds of billions of dollars in asset purchases and backstopped foreign authorities with the offer of cheap dollar financing.

The virus has unleashed a sharp sell-off on the stock market, wiping out considerable equity for households. While a survey on Tuesday showed a modest drop in confidence among homebuilders in March, its developers cautioned that half of the builders were canvassed before March 4 and it expected the impact of the virus to show in the April survey.

Single-family homebuilding, which accounts for the largest share of the housing market, increased 6.7% to a rate of 1.072 million units in February. Single-family housing starts increased in the Northeast, Midwest and the populous South, but fell in the West.

Single-family housing building permits rose 1.7% to a rate of 1.004 million units in February. In the volatile multi-family housing segment, starts for buildings with five or more units tumbled 17.0% to a rate of 508,000 units last month. Permits for the construction of buildings with five or more units dropped 20.2% in February.