New-Home Starts Fall to 2-Year Low

April 22, 2019

Housing starts continued to underperform in March, despite calls from the housing industry to build more to help inventory-starved markets. Total housing starts fell to a seasonally adjusted annual rate of 1.14 million in March, the lowest since May 2017, the Commerce Department reports. Starts are 14.2 percent lower than a year ago. “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.

Single-family housing starts in the early months of 2019 are off 5 percent from a year ago, the NAHB notes. “Several factors are negatively affecting the housing market, including excessive regulations, a lack of buildable lots, and ongoing labor shortages,” says NAHB Chief Economist Robert Dietz. “Recent declines in mortgage rates should help support the market in future months, however.”

Regionally, combined single-family and multifamily housing starts dropped by 27.1 percent in the West, 14.2 percent in the Northeast, and 10.9 percent in the Midwest, the U.S. Commerce Department’s data shows. The South was the only region to post an increase in new-home starts last month, increasing 1.5 percent month over month.

Housing permits—a sign of future production—was also down in March, decreasing 1.7 percent. Permits were down by 16.9 percent in the West, 3.7 percent in the Midwest, and 0.4 percent in the South. Permits remained unchanged in the Northeast.

But some housing economists are hopeful for a turnaround, given low mortgage rates and a stable job market. Analysts at Credit Suisse also noted in a homebuilding report last week that they believe March’s shortfall could be partially blamed on bad weather and could have been a temporary blip. “We note March’s slowdown is partially attributable to inclement weather including atypical rainfall, snow, and cold, which affected the majority of the country for half of the month,” the analysts wrote. “As such, we remain cautiously optimistic on the strength of the overall selling season.”