Fewer New Homes in the Pipeline

April 20, 2016

Homebuilding slowed in March, dipping to its lowest level since October, the Commerce Department reported Tuesday. Housing starts fell 8.8 percent compared to a month earlier and were at a seasonally adjusted annual rate of 1.9 million.

The bulk of the nationwide slowdown was attributed to the Midwest, where single-family and multifamily starts dipped 25.4 percent month-over-month. (Starts were also down by 15.7 percent in the West and 8.4 percent in the South.) Construction of new homes, meanwhile, rose in the Northeast, pushing upwards by 61.3 percent month-over-month. Economists say the weather may have been a factor in regional decreases.

Single-family starts — which account for about two-thirds of the market — dropped 9.2 percent last month to 764,000. Still, single-family construction is up 22.6 percent year-over-year. Starts on multifamily buildings of five or more units dropped 8.5 percent to a rate of 312,000 in March.

"Single-family starts are off from their strong showing in February, but this slowdown represents a return to a long-run, gradual growth trend that is consistent with builder confidence levels, which are overall positive," says Robert Dietz, chief economist for the National Association of Home Builders. "While we are also seeing a monthly decline on the multifamily front, multifamily construction is expected to level off at a solid rate given the high level of rental housing demand."

But that rebound may take some time. Building permits, which are a gauge of future construction, fell 7.7 percent in March to 1.086 million.

"That is somewhat more worrisome as the permit demand has lagged starts for the last two months," Joel Naroff of Naroff Economic Advisors Inc. told The Wall Street Journal. That "could signal continued softness in the market."

Source: “U.S. Housing Starts Fell to Lowest Level Since October,” The Wall Street Journal (April 19, 2016) and National Association of Home Builders