Single-family housing starts slipped 3.7 percent in March, recording only 867,000 units for the month according to data on monthly residential construction in March released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development on Tuesday.
Overall housing starts in March rose 1.9 percent to 1.3 million units, while building permits increased 2.5 percent to approximately 1.3 million units and were 7.5 percent above the rates during the same period last year, the report said. Permits for single-family homes slipped 5.5 percent below the February rates to 840,000 units.
Home completions also remained below the estimated numbers for single-family housing, slipping 4.7 percent below the February rates to 841,000.
“Single-family starts are the key to replenishing our severely depleted housing inventory,” said Danielle Hale, Chief Economist, at Realtor.com. “Last month’s single-family starts are less than half of what we saw during the peak in early 2006 and roughly 30 percent below normal. As single-family starts lag, for-sale inventory remains limited. Realtor.com March data shows inventory is 8 percent lower and prices are 8 percent higher than last year.”
According to Tendayi Kapfidze, Chief Economist at LendingTree even as multifamily housing starts are accelerating, single-family starts have lost momentum continuing to remain below the 900,000 mark, a trend that has been continuing for the past five months.
“The change towards multi-family could be the initial signs that affordability is starting to impact the mix of construction,” said Kapfidze. “Multi-family units are at lower price points and include significant rental units. Notably, single-family starts are particularly weak in the high-cost Northeast that is also the most exposed region to the negative impacts of the tax plan.”
Despite these headwinds, the housing market will continue to grow as builder confidence remains high and construction jobs show an uptick.
“Two important trends signal that some modest relief for the housing supply shortage is on the way—the continued year-over-year growth in completions means more homes on the market in the short-term and the dramatic rise in construction employment this month indicates housing construction is likely to increase in the months ahead,” said Mark Fleming, Chief Economist at First American.
“Inventories are constrained in both the new home and existing markets. The 3-month average single-family building permits were the highest since 2007 as builders respond to the high demand,” said Kapfidze. “Builder confidence is high and construction jobs are increasing, all of which are encouraging signs. The tax plan will also increase builder margins by 10-15%, encouraging more activity including at the lower end which has been underserved in the recovery.”
“The number of residential construction jobs is now 4.5 percent higher than a year ago and this growth supports further improvement in the pace of home building,” said Fleming. “The continued year-over-year growth in completions means more homes on the market in the short-term and the dramatic rise in construction employment this month indicates housing construction is likely to increase in the months ahead.”