On Wednesday, March 16th, the Commerce Department’s Census Bureau will release February data on housing starts and building permits. After experiencing a huge downturn, private forecasters expect housing activity to improve appreciably during 2011 and 2012. The Blue Chip consensus expects housing starts to increase about 13 percent during 2011 and an additional 30 percent during 2012.
There are several key reasons for the expected pickup in housing activity. Homes have become more affordable, thanks to lower home prices. Further, the Blue Chip consensus expects continued improvements in the labor market, with civilian employment expected to increase by more than 2 million in both 2011 and 2012, which would be the strongest back-to-back gains since 2005-06.
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When the Census Bureau releases its report, it will be useful to remember that there can be a fair amount of month-to-month volatility in the data on new residential construction (in fact, housing starts and permits are two of the more volatile monthly economic indicators produced by the Census Bureau). For example, permits fell in January after a jump in December while starts jumped in January after a decline in December. So, February’s figures may not provide a clear signal about the direction of the housing industry, and instead we’ll have to see how the housing starts and permits data evolve over the upcoming year.
~Mark Doms, Chief Economist, U.S. Department of Commerce
March 15, 2011
