A recent headline from Metal Miner magazine declares, “U.S. Housing Starts Surge More Than +39% Year-Over-Year in February 2020,” while — describing the same data — Reuters says, “U.S. Housing Starts Fall Less Than Expected in February 2020.” Who to believe? Well, both.
Housing starts in the US dropped -1.5% in February 2020, pulled down by a sharp decline in the construction of multifamily housing units, to a seasonally adjusted annual rate of 1.6 million units, the US Commerce Department and the Department of Housing and Urban Development said March 23. 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.
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.
US Building permits drop -5.5% from January
US privately owned housing building permits tumbled -5.5% to a rate of 1.464 million units in February, but increased +13.8% compared to February 2019. In January 2020 permits for future home construction had surged to a rate of 1.550 million units, which was the highest level since March 2007.
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.
The US housing market has regained its footing as mortgage rates have declined after hitting a soft patch beginning in 1Q 2018 through 2Q 2019.
Benchmark Softwood Lumber Prices March 2020 vs US Housing Starts Feb 2020
In week ending March 27, 2020, the price of benchmark softwood lumber commodity Western Spruce-Pine-Fir 2×4 #2&Btr KD (RL) were slashed $50, or -12%, from the previous week to US$356 mfbm, said North American weekly lumber price newsletter Madison’s Lumber Reporter Friday. Last week’s price is $90, or -20%, less than it was one month ago. Compared to one year ago, this price is down $22, or -6%.
Shrewd investors know that construction framing softwood lumber prices are a good leading indicator for US housing activity, including home building and home sales. It is, however US house prices which have the best correlation to the movement and change of wood building materials. Don’t miss out, get lumber price data updates directly to your desktop every Friday morning:
Be ahead of these data releases … Don’t delay, this week’s softwood lumber market comment was published to the website Monday morning.
Madison’s Lumber Prices, weekly, are a good forecast indicator of US home builder’s current lumber buying activity ——> DETAILS
Meanwhile, the US Mortgage Bankers Association in a dire letter to regulators Sunday warned that the US housing market is “in danger of large-scale disruption,” due to efforts by the Federal Reserve that were intended to help rescue the mortgage market, said CNBC Sunday. The Fed had come into the mortgage market forcefully two weeks previous when rates began to rise due to a large array of investors selling mortgage securities to raise cash, in part in an effort to offset big losses in the stock market, according to CNBC .
In the week of March 16, the Fed bought US$68 billion of mortgages. But the market still saw massive selling, prompting the Fed to come in with an additional US$183 billion of purchases the following week. The combined US$250 billion in mortgage purchases by the Fed over those two weeks was US$84 billion more than the Fed had bought over any four-week period during the financial crisis in 2009. These purchases were meant to drive down rates, and they did.
Elsewhere, New York Times reported that the US Congress issued a US$2.2 trillion stabilization package March 26 which will allocate more than US$12 billion in funding for federal housing and rental assistance. The package, which cleared the Senate, includes over US$2 billion for rental assistance and US$685 million for public housing. The stimulus package comes after the Federal Housing Administration, which is part of the Department of Housing and Urban Development, put in place a 60-day moratorium on foreclosures and evictions for 8.1 million owners of single-family homes who have mortgages backed by the office.
The Federal Housing Finance Agency said it would do the same for the 28 million owners of single-family homes with mortgages backed by Fannie Mae and Freddie Mac.