U.S. Housing Starts Increase to 583,000 units in February
One better month does not a turnaround make. Just the same, it was encouraging to see that total U.S. housing starts in February increased to 583,000 units from the incredibly low level of only 477,000 units in January. From June 2008 through January 2009, there were nothing but step-downs in starts on a month-to-month basis.

A little less than 600,000 units still remains weak by any measure. And the number-of-months inventory of unsold single-family housing units still extends out beyond a year, at the current sales rate. Nevertheless, a number of recently-released statistics and other indicators suggest that the U.S. housing market may be waking up from its coma.
The following are some of the factors contributing to a more positive outlook.

(1) Very low prices. This is not just due to lack of demand. It also results from bank-held housing stock being dispersed at exceptionally low price levels. Furthermore, whatever new home construction is being carried out has the advantage of proceeding under a regime of bargain-level building material costs (e.g., lumber).

(2) Very low interest rates. The face-value federal funds rate is barely above 0.00% and this has lowered mortgage rates across the board. Carrying charges are historically favorable for potential buyers that can prove they are creditworthy.

(3) A host of government measures, directed at lending agencies, to make it easier for householders to stay in their homes and avoid foreclosures. This reduces potential additions to the "unsold inventory" glut that continues to plague the market.

(4) Existing home sales increased in the month, as did both new home sales and starts. Single-family starts were about the same on a month-to-month basis in February, but that was a lot better than the double digit declines in four of the preceding five months. "Multi-family starts", which is the more volatile series, almost doubled on a year-over-year basis in the latest month.

(5) Starts increased on a month-to-month basis in three of the four major geographic sub-regions of the country. Only in the West did they decline. It has been suggested that starts nationally picked up due to milder winter weather in February than usual. However, the regional dispersion of the increase suggests that there were other forces at play as well.

The Jobs Outlook is the Major Negative
Of course, the housing sector cannot fully recover until jobs are more secure. Thus far in this recession, employment has been in free fall. Furthermore, a restoration of employment prospects is a lagging phenomenon in any economic recovery.

Therefore, in residential construction markets, the most that can be hoped for in the short-run is that prices will stabilize and that starts will begin to exhibit some bounce − actually more of a "hop" − off the bottom. Over time, that bounce will build momentum and by the fall, should begin to take activity levels on an upward trajectory.