Home Construction Slips Again in March, Putting Pinch on Sales Inventory

Home construction declined 0.3 percent in March to a seasonally adjusted annual rate of 1.14 million units, the Commerce Department said Friday.

Within this overall number, single-family starts fell 0.4 percent to 785,000 units. The multifamily sector, which includes apartment buildings and condos, remained flat at 354,000 units.

Housing starts declined sharply last month in the Northeast and Midwest, and edged down slightly in the South. However, they surged in the West, where housing starts were nearly 30 percent higher than a month earlier.

Including Friday’s numbers, housing starts have now fallen 9.7 percent for the year, despite the fact a solid job market suggests there’s increased demand from would-be buyers.

Greg Ugalde, chairman of the National Association of Home Builders and a home builder and developer from Torrington, Conn., said while there may be potential buyers, “housing affordability continues to be a concern.”

Robert Dietz, the association’s chief economist said recent declines in mortgage rates should help. The average 30-year mortgage rates that have drifted down to 4.17 percent after peaking at nearly 5 percent  in November.

But Dietz went on to say the home building industry is also being constrained by “excessive regulations, a lack of buildable lots and ongoing labor shortages.”

Analysts at Credit Suisse released a report on homebuilding Thursday noting that new contracts were 7 percent lower compared to a year ago in March and buyer traffic was down 17 percent.

“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 team wrote. “As such, we remain cautiously optimistic on the strength of the overall selling season.”

In addition, building permits for new single-family homes and apartments — an indicator of future construction activity — fell 1.7 percent to an annual rate of 1.27 million units, suggesting the supply of new homes for sale will remain tight for some time.

Single-family permits fell 1.1 percent to an annualized pace of 808,000 units, while multifamily permits dropped 2.7 percent to an annual rate of 461,000 units.

In other housing-related news, the Joint Center for Housing Studies of Harvard University said Thursday that home improvement repair spending is expected to continue dropping through early next year.

The center forecasts that year-over-year growth in homeowner remodeling expenditure will slow from about 7 percent today to 2.6 percent by the first quarter of 2020.

“Home improvement and repair spending has been in an extended period of above trend growth for several years, due to weak homebuilding, aging homes, and other factors,” said Abbe Will, associate project director in the Remodeling Futures Program at the center. “However, growth in remodeling is expected to fall below the market’s historical average of 5 percent for the first time since 2013.”