After slipping 0.7% in February (revised from a preliminary estimate of a 0.6% decline), housing starts tumbled 11.9% in March to 947,000 units. After two consecutive months of sharp gains, there was a large decline in the highly volatile multi-family starts category. Single-family starts fell for the twelfth consecutive month. The median of analysts’ projections (as surveyed by Bloomberg) was for total starts of 1.01 million. Note that there were minor upward revisions to starts in January and February. For the third consecutive quarter, housing starts fell at a better than 30% annualized rate. The first quarter average for housing starts is down an annualized 34.5% versus the fourth quarter average. This result indicates that residential investment will again be a significant drag on 1Q real GDP growth.

Starts were weak across the country, dropping a sharp 21.4% in the Midwest, 12.6% in the South, 8.5% in the Northeast and 5.7% in the West. Single-family starts fell 5.7% to 680,000. Multi-family starts, a highly volatile series, tumbled 24.6% in March to 267,000 units.

Building permits, a proxy for future building activity, fell for the tenth consecutive month. The March decline in permits was 5.8% and puts the level of permits at 927,000. The first quarter average for building permits is down an annualized 42.4% versus the fourth quarter average. Single-family housing permits in March were down 6.2% to 606,000 units. The decline in building permits suggests that demand remains weak and that employment in the residential construction industry will be under pressure.

The slump in residential construction activity continues. Total privately owned housing units under construction fell 2.2% in March to 1.002 million units. Housing units under construction fell an annualized 19.2% in the first quarter and has now fallen for eight consecutive quarters. Single-family homes under construction fell 3.8% in March to 558,000 units. With credit tightening, foreclosures rising, inventories increasing and employment growth slowing, further declines in construction are expected.