Housing market still healthy

February housing starts were much weaker than expected (897K vs. 1040K), but the weakness is quite likely to prove temporary.

The drop in starts last month was probably weather-related. Builders' sentiment suggests that conditions are probably slowly improving.

The chart above shows February building permits, which are still trending higher. This corroborates the slowly improving trend in builders' sentiment. Permits lead starts, so we'll likely see starts picking up in the months to come. There is plenty of upside potential in the housing market.