Today the Commerce Department's Bureau of the Census released its report on Housing Starts and Building Permits for March. According to the report, privately owned housing starts in March were at a seasonally adjusted annual rate of 1,447,000. This is 3.85 (+/-7) percent below the revised February rate of 1,505,000.

As I said last month, the statistical uncertainty in the monthly housing starts numbers makes them meaningless. This month's change could lie anywhere between -3.15 percent and + 10.85 percent. Last month I suggested that we concentrate on the permits data to gather some insight into the direction of the residential housing market. The accuracy and timeliness of the permits data is such that the Commerce Department has chosen to incorporate it as one of the eleven indicators it uses to construct its Composite Index of Leading Economic Indicators (LEI).

The seasonally adjusted annual rate of housing units authorized by building permits in March was 1,412,000; this is virtually unchanged (+/-1 percent) from the revised February rate of 1,411,000. Since the first of the year, the annualized permit rate declined by 4.5 percent.

Year-over-year March 1996 permits are 14.25 (+/-2) percent above the March 1995 level. During the first quarter of this year the number of permits issued was 10 (+/-1) percent higher than a year ago.

So, residential housing activity, as reflected by new building permits, is currently much stronger than it was a year ago. But, since the first of the year, the rate of growth in new housing authorizations has slowed.

In a related story, the National Association of Home Builders (NAHB) reported earlier this week that its April Housing Market Index (HMI) was still at the same high level (60) recorded in March.

The HMI is constructed from three sub-indexes that measure current single-family home sales, expected home sales during the coming six months, and prospective buyer traffic at new home sites. Each month for the past 15 years the NAHB has polled its membership for data on these three indicators. A score of 50 means that about the same number of respondents reported good or poor conditions. In April the current sales index was at 63 and the traffic index was 51. Both these readings were the same as last month. Perhaps encouraged by the current market conditions, the builders grew more optimistic, pushing the expected sales index from 65 to 69 between March and April.

Once again, the builders theorized that it was a perceived threat of still higher interest rates that attracted buyers to the market.

Byline: Lafferty (MF Merlin)