- Single-family home starts up 2.7% in March
- Building permits for single family homes up 4.1%
- Total housing starts fall 0.8%; Permits down 8.8%
WASHINGTON, April 18 (Portal) – US single-family home construction surged for a second straight month in March, while permits for future housing projects surged, offering some glimmers of hope to the depressed housing market ahead of the busy spring selling season.
The improvement in the single-family home market segment, reported by the Commerce Department on Tuesday, likely reflected buyers benefiting from a fall in mortgage rates. A survey Monday showed that falling mortgage rates and a tight supply of pre-owned homes were supporting the new home market.
“Mortgage rates have come down from the October-November highs and have helped spur demand and sales activity,” said Ben Ayers, senior economist at Nationwide in Columbus, Ohio. “But the environment remains challenging with high input and labor costs for builders and expensive financing options for buyers.”
Single-family housing starts, which account for the bulk of residential construction, rose 2.7% last month to a seasonally adjusted annualized rate of 861,000 units. Data for February was revised upwards to show that single-family home construction increased at a rate of 838,000 units instead of the previously reported pace of 830,000 units.
Single-family home construction rose 4.4% in the Northeast and 23.6% in the Midwest. In the densely populated south it rose by 4.8%, but fell by 16.0% in the west. Single-family housing starts fell 27.7% yoy in March.
The US Federal Reserve’s aggressive rate hikes have pushed the housing market into a recession, with residential investment contracting for seven consecutive quarters, the longest such streak since the collapse of the housing bubble triggered by the Great Recession of 2007-2009.
However, there are signs that the housing market is stabilizing at a very low level. The National Association of Home Builders/Wells Fargo housing market index hit a seven-month high in April.
Mortgage rates have fallen from last year’s highs, with the average rate on the popular 30-year fixed-rate mortgage falling to 6.27% last week from a peak of 7.08% in early November, according to data from mortgage financing agency Freddie Mac.
Those rates have fallen along with US Treasury yields on hopes the Fed will not hike borrowing costs beyond next month amid signs the economy is slowing.
However, the recent financial turmoil following the collapse of two regional banks could prompt banks and mortgage lenders to tighten underwriting standards.
“Tighter credit conditions would make it harder for homebuilders to finance new projects, which would weigh on future construction,” said Doug Duncan, chief economist at Fannie Mae.
Wall Street stocks traded lower. The dollar fell against a basket of currencies. US Treasury bond prices rose.
Housing starts and building permits
COMPLETIONS INCREASE
Housing starts for residential projects with five units or more fell 6.7% to 542,000 units. The construction of apartment buildings will continue to be supported by the demand for rental apartments. However, economists see limited room for further gains and note an increase in vacant homes. The stock of apartment buildings under construction is at a record high.
“There is an indication here that the baton may be passing from rental to homebuy,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “None of this is meant to suggest a strong rebound in housing activity, but it does support the view that the worst of the decline may be behind us for now.”
Overall housing starts fell 0.8% to a rate of 1.420 million units last month, as the decline in multi-family housing construction offset the rise in single-family housing.
Economists polled by Portal had forecast the number of launches would fall to 1.40 million in March.
Single-family home building permits rose 4.1% in March to 818,000 units, a five-month high. They rose in the Northeast, South, and West but remained flat in the Midwest.
Approvals for housing projects with five or more units fell 24.3% to 543,000 units. Overall, building permits fell by 8.8% to 1.413 million units.
The number of houses with building permits that have not yet started fell by 3.0% to 291,000 units. The stock of single-family homes fell 2.3% to 130,000 units, its lowest level since February 2021, while the completion rate for this segment rose 2.4% to 1.050 million units.
The stock of single-family homes under construction fell 2.3% to 716,000 units, the lowest level since August 2021.
“The housing sector appears poised to have some new completed inventories in the coming months,” said Colin Johanson, an economist at Barclays in New York.
Reporting by Lucia Mutikani; Edited by Chizu Nomiyama
Our standards: The Trust Principles.