New-Home Construction Improves Despite High Inflation, Rising Mortgage Rates, and the Shortage of Skilled Labor and Materials

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From realtor.com

The numbers: U.S. home builders started construction on homes at a seasonally-adjusted annual rate of roughly 1.79 million in March, representing a 0.3% increase from the upwardly-revised figures for the previous month, the U.S. Census Bureau reported Tuesday. Compared with March 2021, housing starts were up nearly 4%.

Permitting for new homes occurred at a seasonally-adjusted annual rate of roughly 1.87 million, up 0.4% from February and 6.7% from a year ago.

Economists polled by MarketWatch had expected housing starts to occur at a median pace of 1.73 million and building permits to come in at a median pace of 1.82 million.

What happened: Single-family starts and permits declined compared with both the previous month and March of last year. Every region saw declines in these figures between February and March, aside from the Midwest where new single-family construction rose 7%.

Consequently, multifamily housing projects prevented both housing starts and building permits from declining. Permits for the construction of housing projects with five or more units rose 11% since February, and were up nearly 34% from the same time a year ago. Similarly, multifamily starts climbed 7.5% on a monthly basis and 28% from a year ago.

The construction backlog continued to grow, as the number of housing projects under construction rose 2.3% from the previous month and 24% from a year ago.

Looking ahead: “The shortage of skilled labor, materials, and lots are persistent headwinds to increasing the pace of new construction. According to the February housing starts report, the number of single-family homes authorized but not started was nearly 25% higher than one year ago because of supply-chain disruptions,” said Odeta Kushi, deputy chief economist at title insurer First American.

“Even with rising interest rates and ongoing issues surrounding geopolitical stability, supply chain issues, and inflation, the overall lack of inventory over the past year has continued to drive demand for more housing starts as builders continue to try to push inventory to market,” said Kelly Mangold, a principal with RCLCO Real Estate Consulting.

Full article at realtor.com

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