American homebuilders were doing just fine before the pandemic, but a downward turn in permits signals a sharp pullback in construction in the months ahead. Housing starts fell 1.5% to 1.599 mln in February, less than the market expected and after a large upwardly-revised gain to a cycle-high of 1.624 mln. However, January looks to mark the high for this cycle, as permits dropped 5.5% to 1.464 mln and are poised to sink much further until home buyers and builders sense an end to the pandemic. Note that new mortage applications dove 5.9% last week, so buyers are already pulling in their horns, despite record low mortgage rates. Better affordability and piles of fiscal stimulus will support a subsequent recovery, but only after the damage to employment and confidence has run its course.

Table 1 - United States — Housing Starts, Building Permits

(millions of units : a.r.)

Source: BMO Economics, Haver Analytics

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