By Mike Colpitts
Despite record warm weather making it attractive for new home builders, housing starts saw an unexpected slide in March, but new home building permits rose to the highest level in three and a half years, according to the Commerce Department.
The drop in new home construction caught economists off guard as starts fell 5.8% for the month to a seasonally adjusted rate of 654,000 homes. February starts were revised downward to 694,000 units or 4,000 homes lower than previously estimated.
Economists had been expecting 705,000 starts in the month of March. The slide was the largest since April of last year, indicating that new home construction still has a long way to go before recovering. Bank listed foreclosures and short sales are cutting the prices of homes that are being sold, but a demand for new housing still appears to be growing in the U.S. as new home developments report an increase in walk-in traffic.
New home permits jumped 4.5% to 747,000 units last month, the highest permits have been since September 2008. Warmer weather for most of the country can only help home building as the long moribund housing sector shows strengthening signs of a recovery, despite weak signs of the U.S. economy.
The average temperature in the county was 51.1 degrees during March or 38.6 degrees warmer than the 20th century average and the hottest March on record going back to 1895, the National Oceanic Atmospheric Administration said. But high unemployment and an over supply of homes is depressing home prices to keep a lid on the market.
However, spring home sales are expected to continue a pace above last year as record low mortgage rates set by lenders produce an attractive market for home buyers. The average fixed rate on a 30-year mortgage was 3.88% last week, according to Freddie Mac and may fall again this week.
A record volume of foreclosures continues to trouble the housing market, but has triggered a record number of apartment units to be produced across the U.S. Builders started work on 241,000 units last month, the second highest in more than three years as former mortgage holders seek new places to live after being foreclosed.