Housing is an important long leading indicator. What we see now in mortgage applications, new home sales, permits and starts is informative of what the economy will be like 12+ months from now in 2022.

The headline numbers for both permits and starts for February, released this morning, were both poor, off -10.8% and -10.3%, respectively. The temptation is to say, “higher interest rates, We’re DOOMED!!!” Not so fast. In context, the declines were well within a normal month-to-month variation, and at least some of the declines looks like more fallout from the Big Texas Freeze that we saw yesterday in industrial production and retail sales.

Here is the headline graph covering the last 5 years for both starts (blue) and permits (red):

Two things are of interest here: (1) note that starts fell much more than permits, similar to what happened in the last two winters; and (2) while typically permits lead starts by a month or two, this decline in starts began *before* permits. Neither of these facts are conclusive, of course, but they do suggest an external reason for the pattern - e.g., an outsized winter “event” in February.

I’ve also separated out the South Census Region that includes Texas from both permits and starts in the other three Census Regions (Northeast, Midwest, West) combined in the below two graphs. First, here’s permits:

Note that while both declined, the Southern region had the bigger one.

Now, here’s starts:

Again, note the outsized declines in the other three regions including both northern ones in the last two winters, that hasn’t occurred this year. Put another way, the decline in the South, including Texas, was a *relatively* outsized one.

Finally, here is the above regional data for starts shown as a month over month % change:

As I wrote above, February’s declines are hardly noteworthy as monthly declines from the perspective of monthly changes in the past five years. And the February decline in starts in the South this year is bigger than that of the other three regions combined, unlike the last several winters.

I don’t want to oversell this, because the above information is hardly conclusive. But all of this information suggests that, while interest rates most likely did affect at least permits in February, the bigger reason for the relatively big declines in permits and starts was the closure of government offices and inability to undertake new construction in Texas and other nearby areas affected by the Big Freeze.