Housing Starts, Permits
Rose 0.8% in March

Boosted by warmer weather, construction of new homes increased 0.8% in March to a seasonally adjusted annual rate of 1.518 million, the highest level this year, the Commerce Department estimated Tuesday.

Building permits also increased 0.8% in March to a seasonally adjusted annual rate of 1.544 million.

The figures were slightly higher than expected by economists surveyed by MarketWatch. The median estimate for housing starts was 1.50 million, while permits were expected to be at 1.52 million. See Economic Calendar.

Housing starts are down 23% from March 2006, while permits are off 26%.

The figures could show renewed optimism on the part of builders that they've seen the worst of the correction in the housing market. But the month-to-month figures are too unreliable to make firm judgments based on one month.

On Monday, the National Association of Home Builders reported that builder optimism sank in April, with builders warning that tighter lending standards for subprime loans could prolong the slump through 2008. See full story.

Economists said that favorable weather in March compared with February probably had a major impact on construction. While February was colder and wetter than usual, March was warmer and drier in much of the nation.

Starts in the Midwest surged 44%, the biggest gain in 16 years. Starts in other regions fell.

And the government cautioned that the monthly figures are unreliable. For housing starts, the standard error is so high that the reported figure could be off by as much as 11% either way.

It can take up to five months for a new trend in housing starts to be confirmed in the data. Over the past five months, starts have averaged 1.52 million annualized, about the same as in the five months ending in February.

Completions of new homes fell 0.7% to a seasonally adjusted annual rate of 1.63 million, an indication that builders are ramping down their inventories. It's the lowest number of completions since August 2003. It takes about 6 months for a home to go from groundbreaking to completion.

There were 1.2 million homes under construction in March, down 16% from the previous March.

Starts of single-family homes increased 2% in March to a seasonally adjusted annual rate of 1.22 million. Permits for single-family homes rose 1.4% to 1.11 million annualized.

In a separate report, the Labor Department reported that consumer prices rose 0.6% in March, while core prices rose just 0.1%. Both figures were below expectations. See full story.

-- Rex Nutting is Washington bureau chief of MarketWatch.

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