New-home construction in the U.S. slumped more than projected in March, reflecting a broad-based retreat that showed the industry lost momentum heading into the busiest time of year.
Residential starts decreased 8.8 percent to a 1.09 million annualized rate that was the lowest since October and weaker than any forecast of economists surveyed by Bloomberg, Commerce Department data showed Tuesday in Washington. Permits, a proxy for future construction, also dropped.
The report, following figures on Monday that showed builder sentiment was little changed in April, may raise questions about the strength of the housing rebound at a time manufacturing has barely emerged from a slump and overseas markets are cooling. Homebuilding may plod along until faster wage growth and easier credit conditions accelerate sales and encourage construction.
“There’s not a lot of upward momentum,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, said before the report. “Some of it is part of the ups and downs of the monthly data.”
The median forecast of 78 economists surveyed by Bloomberg called for a drop to 1.17 million.
Estimates of 78 economists polled ranged from 1.12 million to 1.22 million. The previous month was revised up to 1.19 million from a 1.18 million pace.
Housing starts have see-sawed in a narrow range over the past year, signaling the residential real-estate rebound from the recession has petered out. The figures, however, can be very volatile, diminishing the significance of any one reading.
For example, the report showed there was a 90 percent chance last month’s figure was would be within a range of a 19.9 percent decrease to a 2.3 percent gain.
“We recommend taking the monthly housing numbers with a huge grain of salt, but there’s going to be a little more nervousness” given the weak recent data on industrial production and retail sales, Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Florida, said before the report.