A more robust US housing market activity likely ahead

U.S. housing starts came in at 897 thousand annualized units in February, falling well short of market expectations for 1.040 million units. This represents a 17.0% M/M decline relative to the upwardly-revised 1.081 million starts in January (from a 1.065mn initial estimate). 

The decline was across both major segments. Geographically, starts declined in all four regions. Unsurprisingly, the weather-impacted Northeast (-61k to 47k units) saw the largest decline. 

The one silver lining is that building permits actually rose 3.0% M/M to 1.092 million units in February, exceeding market expectations for a rise of only 0.5% M/M.

TD Economics notes in a report on Tuesday:

• The headline decline was a definite shocker, even exceeding last year's steep 13% decline in January. Certainly, sharp swings of this sort can occur in winter months. 
  
  
• The fact that permits are showing much more stability and in fact moderately rose on the month inclines us to chalk up much of the drop in starts to the weather, with builders putting off new construction until later.
  
  
• In light of strong employment growth and pent-up demand, we continue to see a strong case for more robust housing market activity ahead, but evidently headwinds continue to weigh on the market. The poor figures suggest more downside risk for first quarter real GDP growth.