By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

Sign up to receive an email as pertinent data are released.

March Housing Starts Down, but Still Out of Touch With New-Home Sales Levels

Single-family housing starts dropped 6.2% in March, with the February level largely unrevised. Single-family permits dropped a more modest 1.1% in March.

Even with these declines, single-family starts remain elevated relative to the levels of mid-2016 and also relative to the recent levels of new-home sales. Our take has been that builders got ahead of demand in the last few months, and that starts had risen much more than sales levels, leading to an accumulation of inventories of unsold new homes. We thought that either new-home sales would have to rise sharply or starts would have to pull back to levels more commensurate with housing demand.

It is hard to tell for sure whether the declines seen in starts in March are the beginning of such a pullback process or merely a one-month blip. As seen in the chart, for now, starts are still well above levels consistent with recent sales volume.

Housing starts have been a bright spot for the economy so far in 2017. While consumer spending and job growth have been relatively sluggish and while 1Q17 GDP growth is expected to come in very weak, residential construction spending has risen nicely so far this year and will actually contribute a good boost to 1Q17 growth. (It is the other sectors of domestic demand that have been flagging in recent months.)

We are skeptical that the strength seen in residential construction so far this year will continue. Again, it will take a surge in new-home sales in coming months for this to happen. We’ll get some indication next week—when March new-home sales are announced—as to whether today’s decline in starts is just a blip or a harbinger of things to come.

Sales and Starts of New, Single-Family Homes
Sales and Starts of New, Single-Family Homes

Source: Census Bureau. As of 31 Mar 17

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 40 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive an email as pertinent data are released.

© Western Asset Management Company 2017. This publication is the property of Western Asset Management Company and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. Investments are not guaranteed and you may lose money. This publication is for informational purposes only and reflects the current opinions of Western Asset Management. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset Management may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence. Potential investors in emerging markets should be aware that investment in these markets can involve a higher degree of risk. Any forecast, projection or target is there to provide you with an indication only and is not guaranteed in any way.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered financial instruments dealer whose business is investment advisory or agency business, investment management, and Type II Financial Instruments Dealing business with the registration number KLFB (FID) No. 427, and members of JIAA (membership number 011-01319) and JITA. Western Asset Management Company Limited (“WAMCL”) is authorised and regulated by the Financial Conduct Authority (“FCA”). In the UK this communication is a financial promotion solely intended for professional clients as defined in the FCA Handbook and has been approved by WAMCL.