US March housing construction up 7%, but one-family units decline

WASHINGTON (ICIS)–US housing construction rose by 7% in March from February, the Commerce Department said on Tuesday, but the gain was wholly due to a surge in apartment projects while the crucial single-family home segment fell by nearly 5%.

In its monthly report, the department said that housing starts last month were at a seasonally adjusted annual pace of 1.036m, an increase of 7% from the upwardly revised February figure of 968,000. The original February housing starts estimate was 917,000.

The March gain in new housing construction also marked a nearly 47% improvement over the pace seen in March 2012.

A 7% monthly gain and the year-over-year advance of 47% suggest an increasingly strong recovery in the long-struggling US housing sector.  But the data can be misleading.

The department’s report shows that all of the gain in new housing last month was in construction of multi-family apartment buildings of five units or more.  That segment of the market was up by 26.9% last month compared with February.

In contrast, housing starts in March for new, single-family homes fell sharply by 4.8% from February.

That slide is of interest because construction of one-family homes is considered the core of the US housing industry. Construction of a 20-unit apartment structure typically does not generate as much investment, employment, land use or materials consumption as the building of 20 individual single-family homes.

The housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals, resins and derivative products such as plastic pipe, insulation, paints and coatings, adhesives, roofing materials and synthetic fibres, among many others.

The American Chemistry Council (ACC) estimates that each new single-family home built represents some $15,000 (€11,400) worth of chemicals and derivatives used in the structure or in production of component materials.

The department’s housing report also suggests that the March surge in new apartment construction might prove to be an anomaly. 

The report said that the number of building permits issued in March fell by 3.9% from February, and that decline included an 8% drop in permits for apartment buildings and a narrow 0.5% slip in permits for single-family home construction.

Building permits are issued by local governments when contractors are ready to break ground and begin construction of a residential structure, so monthly permitting data are seen as an indicator of the housing sector’s near-term prospects.

($1 = €0.76)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy