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Led By Multi-Family, Housing Starts Rose In March

David Krechevsky
Apr 19, 2022

Economist: Builder sentiment remains higher than pre-pandemic, as several long-term trends continue to boost demand for new construction.

  • Housing permits in March rose 0.4% from February and 6.7% from March 2021.
  • Single-family permits were down, but multi-family permits rose.

Despite continuing supply-chain issues for building materials, more privately owned housing units were authorized in March as compared with both a month and a year earlier, led by multi-family units, the federal government said today.

According to the monthly New Residential Construction Report for March, released jointly today by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, privately owned housing units authorized by building permits in March totaled a seasonally adjusted annual rate of 1.873 million, a 0.4% increase from the revised February rate of 1.865 million, and 6.7% above the March 2021 rate of 1.76 million.

Single‐family authorizations in March totaled an estimated 1.15 million, 4.8% below the revised February figure of 1.21 million, the report said. Authorizations buildings with five units or more, however, totaled 672,000 in March, up nearly 11% from 606,000 in February and up nearly 34% from a year earlier, the report said.

Privately owned housing starts in March were at a seasonally adjusted annual rate of 1.793 million, 0.3% above the revised February estimate of 1.788 million, and 3.9% than a year earlier, the report said.

While single‐family housing starts in March totaled 1.2 million, down 1.7% from the revised February total, the rate for buildings with five units or more was 574,000, up 7.5 percent from a month earlier and 28.1% from March 2021, the report said.  

Privately owned housing completions in March also were down overall, totaling a seasonally adjusted annual rate of 1.3 million, 4.5% below the revised February estimate and 13% below the March 2021 rate. 

The decline was led by single‐family housing completions, totaling 1 million in March, 6.4% below the revised February rate and 3.3% fewer than a year ago. The March rate for buildings with five units or more was 292,000, up 1% from February but down 36% from a year earlier.

Odeta Kushi, deputy chief economist at First American Financial Corp., said that report is encouraging for the housing market. 

“Housing starts beat consensus expectations in March,” she said. “More groundbreaking means more homes for a supply-constrained market.”

Still, she noted that builders continue to face supply-chain disruptions that have increased prices for building materials, “as well as a shortage of skilled labor, materials, and lots that make it difficult to increase the pace of construction.”

“The number of single-family homes authorized, but not started was nearly 15% higher year over year,” Kushi continued. “Builders have a backlog of uncompleted homes to get through before they can break ground on new projects. In March, there were 811,000 single-family units under construction (seasonally adjusted), the highest level since 2006.”

In addition to supply-chain disruptions, she said. builders are growing concerned about the declining affordability of homes. “In February 2022 , the average 30-year, fixed mortgage rate stood at 3.8%, and now it’s above 5%. The increase in rates since February has reduced consumer house-buying power by $60,000.”

Kushi said “sagging” homebuilder confidence, which fell in April for the fourth straight month, is a reflection of all these concerns.

“Yet,” she added, “it’s important to point out that homebuilder confidence is less ‘bullish’ as opposed to actually ‘bearish.’ Builder sentiment remains higher than pre-pandemic, as several long-term trends continue to boost demand for new construction — particularly a growing labor market, demographic tailwinds from millennials entering their prime home-buying years, and a lack of existing-home inventory.”

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