Most of the economic data produced by government statisticians is reported on an “SAAR” basis, which stands for Seasonally Adjusted Annual Rate. There are good reasons for SAAR adjustments: the data is made much more comparable over long periods, and one-offs do not require endless explanations. But, we need to remember that SAAR is not a description of what literally has happened.
Today the Commerce Department reported that construction began on 583,000 housing units in February. This was a 22% increase over January and the biggest month-to-month jump in almost 20 years. None of the estimates of the 71 economists polled by Bloomberg News was even close. Multi-family starts—townhouses, condos, and rental apartments—soared an amazing 82%, from 124,000 units in January to 226,000 units last month.
All these numbers, however, are SAAR. Let’s look underneath and see how much actual residential construction began in February. Actual construction is, after all, creates actual employment and actual commerce. Construction actually began on 40,400 units of new privately owned housing units in February, of which 24,600 were single-family and 15,700 were multi-family. There is some good news here. February housing starts marked a significant increase over 37,700 starts in December and just 31,100 in January. But January was an all-time low going back to 1946; in fact, before last November, there had been less than 50,000 monthly housing starts exactly once before, in January 1982, when the US was mired in a deep recession and mortgage rates were in the mid-teens.
Any way we look at year-over-year comparisons between this February and last, the comparison is bleak. In all phases of construction, from the issuance of permits to the completion of construction, we see very large double-digit declines. In total, on an unadjusted basis, the number of housing starts was 48.5% lower than a year ago. Permit issuance is 48.8% lower, and there are 25.8% fewer units under construction. Neither is any region immune, although the situation in the West is truly horrific. Both housing starts and building permits there ware down 60% from February 2008.
The February data provides a bit of hope that housing may, just may, have begun to turn up. But the hole is very, very deep.