- Single-family housing starts rise 2.7% in March
- Single-family building permits jump 4.1%
- Overall, housing starts fell by 0.8%; permits down 8.8%
WASHINGTON, April 18 (Reuters) – U.S. single-family home construction rose for a second straight month in March as future building permits jumped, offering some glimmers of hope for the depressed real estate market ahead of the busy spring sales season.
The improvement in the single-family segment of the market, which was reported by the Commerce Department on Tuesday, likely reflects buyers taking advantage of lower mortgage rates. A survey on Monday showed that lower mortgage rates and a tighter supply of previously owned homes were supporting the new home market.
“Mortgage rates have retreated from October/November highs, helping to boost 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% to a seasonally adjusted annual rate of 861,000 units last month. Data for February has been revised upward to show single-family home construction hit a rate of 838,000 units instead of the previously reported pace of 830,000 units.
Construction of single-family homes rose 4.4% in the Northeast and 23.6% in the Midwest. It rose 4.8% in the densely populated South, but plunged 16.0% in the West. Single-family housing starts fell 27.7% year on year in March.
Aggressive interest rate hikes by the Federal Reserve have pushed the housing market into recession, with residential investment contracting for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the Great Recession of 2007-2009.
There are, however, signs that the housing market is stabilizing at very depressed levels. 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 dropping from a high of 7.08% in early November to 6.27% last week, according to data from mortgage finance agency Freddie Mac.
Those rates fell alongside U.S. Treasury yields on hopes that the Fed would not continue to raise borrowing costs beyond next month amid signs of a slowing economy.
But recent financial turmoil following the collapse of two regional banks could lead 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 activity,” said Doug Duncan, chief economist at Fannie Mae.
Stocks on Wall Street were trading lower. The dollar fell against a basket of currencies. US Treasury prices rose.
Housing starts for housing projects of five or more units fell 6.7 per cent to 542,000 units. Construction of multi-family dwellings continues to be supported by demand for rental housing. But economists see limited scope for further gains, noting an increase in empty apartments. The stock of multi-family housing under construction is at record highs.
“There’s a hint here that the baton may have shifted from building rental to building to buying a home,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York. “None of this suggests a strong recovery in real estate activity, but it does support the idea that the worst of the declines may be behind us for now.”
With the decline in multi-family housing construction offsetting the rise in single-family projects, overall housing starts fell 0.8% to 1.420 million units last month.
Economists polled by Reuters had forecast housing starts to fall at a rate of 1.40 million in March.
Single-family building permits jumped 4.1% to 818,000 units in March, a five-month high. They increased in the Northeast, South and West, but remained unchanged in the Midwest.
Permits for housing projects with five or more units fell 24.3% to 543,000 units. In total, building permits fell by 8.8% at a rate of 1.413 million units.
The number of homes approved for construction that have not yet started fell 3.0% to 291,000 units. The backlog 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. ‘units.
The stock of single-family dwellings under construction fell 2.3% to 716,000 units, its lowest level since August 2021.
“The housing sector looks set to have a whole new inventory in the coming months,” said Colin Johanson, economist at Barclays in New York.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama
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