Monthly housing data has become a roller-coaster: Industry watchers cheer one month, only to be disappointed the next.
The latest example comes from home construction, which took a bigger-than-expected dip in March following February’s much-hyped surge.
Housing starts fell 10.8% to a seasonally adjusted 510,000 annual rate compared to the prior month, while permits, an indicator of future building activity, also sank. Single-family starts were flat, following a slight increase, the U.S. Commerce Department said Thursday.
“The volatility in the construction figures continues,” said Mike Larson, real estate and interest rate analyst at Weiss Research. “…We’re seeing some give-back in March.”
The news depressed real estate stocks, which on Wednesday had rallied on higher-than-expected confidence levels, the biggest gain in five years, from the National Association of Home Builders and several REIT rating upgrades from Goldman Sachs.
But on Thursday Vornado Realty Trust (VNO) stock was down $1.42, or 3.5%, to $39.82, while office giant Boston Properties (BXP) shares fell $1.28, or 3%, to $41.59. Industrial giant ProLogis (PLD) fell 45 cents, or 5.4%, to $7.99.
With the federal government reporting lower apartment construction dragged down starts, that sector also took a hit Thursday.
Colonial Properties Trust (CLP) stock fell 68 cents, or 9.4%, to $6.60 while Equity Residential (EQR) fell $1.37, or 6%, to $21.07.
Although less construction could be a good thing because of the current supply glut, several home builders also saw declines in their shares. Standard Pacific Corp. (SPF) shares, which soared Wednesday, fell 17 cents, or nearly 11% to $1.45 Thursday. Hovnanian Enterprises (HOV) stock fell 11 cents, or 4.9%, to $2.16.
The news “highlights the ongoing difficulty selling new homes…and underscores our view that hopes for a quick near-term recovery are premature,” Credit Suisse analyst Dan Oppenheim wrote in a note. “Further declines in construction activity are likely and necessary in the coming months in order to work through the excess supply.”
That’s stifled the excitement from the NAHB trade group saying Wednesday that the sector, which is struggling to survive the worst downturn in decades, was at or near a bottom.
The trough, said JPMorgan’s Michael Rehaut, “remains elusive.”
Of course, some might disagree next month.
