Housing Starts Continue to Disappoint

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Housing starts continued to disappoint in March, reaching an annual rate of 1.139 million units, a decrease of 0.3% compared with February and down 14.2% compared with March 2018, according to estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

Starts of single‐family homes were at an annual rate of about 785,000, a decrease of 0.4% compared with about 788,000 in February. Starts of multifamily homes (five units or more per building) were at a rate of 337,000, a decrease of 3.4% compared with 349,000 in February.

Regionally, combined single-family and multifamily starts decreased 27.1% in the West, 14.2% in the Northeast and 10.9% in the Midwest, year-over-year. Starts posted a 1.5% increase in the South.

Building permits in March were also down. They came in at annual rate of about 1.269 million, a decrease of 1.7% compared with February and down 7.8% compared with March 2018.

Permits for single‐family homes were at a rate of 808,000, a decrease of 1.1% compared with February. Permits for multifamily units were at a rate of 425,000, a decrease of 2.7% compared with 437,000 in February.

Regionally, permits were down 16.9% in the West, 3.7% in the Midwest and 0.4% in the South, on an annual basis. The Northeast remained unchanged.

Housing completions were the only bright spot in the report. They were at a rate of about 1.313 million, a decrease of 1.9% compared with February but an increase of 6.8% compared with March 2018.

Mark Fleming, chief economist for First American, says home buyers looking for more housing supply to choose from “can take heart, as builders completed more homes compared with last year, inching closer to balancing inventory with demand.”

“Yet, more is needed to make up for the shortage over the last decade,” he adds.

“The year-over-year decline in single-family residential housing starts is a concern given the increasing demand from millennial home buyers for this type of construction,” Fleming says. “While permits and housing starts are both down compared with last year, this does not align with the expectations of homebuilders, who recently indicated positive sentiment for the spring home-buying season.”

“Despite signs of stabilization of confidence in the marketplace, housing affordability continues to be a concern as housing construction weakens into March,” says Greg Ugalde, chairman of the National Association of Home Builders (NAHB), in a statement.

“Data in the early months of 2019 show single-family starts are off 5 percent from this time in 2018, with notable weakness in the Midwest and West,” adds Robert Dietz, chief economist for NAHB. “Several factors are negatively affecting the housing market, including excessive regulations, a lack of buildable lots and ongoing labor shortages. Recent declines in mortgage rates should help support the market in future months however.”

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