Economic Report: Housing starts rebound as buyer demand buoys builders

The numbers: Housing starts ran at a seasonally adjusted annual pace of 1.32 million in March, up 2% compared to February, the Commerce Department said Tuesday. Permits were at a seasonally adjusted annual 1.35 million rate.

What happened: Builders broke ground on more homes in March, and earlier estimates were revised up handily, suggesting more momentum in the home construction industry than had been seen.

The 1.32 million pace of starts beat the forecast from MarketWatch’s survey of economists, for a 1.255 million pace. Starts were 10.9% higher than in the same period a year ago.

And permits, which foreshadow starts activity in the future, were also strong: 2.5% higher than in February, and 7.5% higher compared to a year ago.

Read: Now Zillow won’t just show you a home — it will sell it to you

Big picture: The Commerce Department’s construction reports are based on small samples and data are often heavily revised. Still, activity is churning higher, even though it’s slow and uneven. For the year to date, starts are 8.0% higher compared to the same three-month period a year ago.

In March, the pace of starts on single-family starts slowed, dropping 3.7% for the month. Single-family starts were 5.2% higher than in March a year ago, however. Analysts watch single-family starts closely for clues on whether home builders see demand for housing that’s owned, rather than rented.

Read: Home builder confidence slides for fourth straight month

What they’re saying: “Housing has not led this economic cycle; it’s not about to start now,” said Ian Shepherdson, chief economist for Pantheon Macro, after the release of the NAHB sentiment numbers Monday.

But that’s the supply side of the equation. Demand is hot after years of underbuilding. On Tuesday, Zillow said it took an average of 81 days to sell a home in 2017, the fastest on record.

Market reaction: After a blockbuster 2017, most publicly-traded builders are seeing their stock prices decline this year. Shares of D.R.Horton, Inc. DHI, +0.70%   have gained more than 33% over the past 12 months, but are down 12% for the year to date. Taylor Morrison Home Corp. TMHC, +1.69%   shares rose nearly 10% over the past 12 months, but have lost 4% so far in 2018.

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