Nationwide housing starts dropped in March, despite continued high buyer demand, which is adding pressure to overall home prices.
Housing starts for single-family and multifamily homes dropped 6.8 percent in March to a seasonally adjusted annual rate of 1.22 million units, the Commerce Department reported Tuesday. Broken out, single-family production plunged 6.2 percent to an annual rate of 821,000 units in March month over month, following a strong February reading. Multifamily starts dropped 7.9 percent to an annual pace of 394,000.
The constraint in new-home construction is proving a big challenge for the overall housing market, says Lawrence Yun, the chief economist for the National Association of REALTORS®.
“A major housing shortage exists in this country,” Yun said in a statement. “It is therefore disappointing to witness in March the continued lackluster performance in new-home building, which was the second lowest activity over the past six months. Home prices have risen by 41 percent and rents have climbed 17 percent over the past five years at a time when the typical worker wage has grown by only 11 percent. To relieve housing costs, there simply needs to be more homes built.”
Across the country, single- and multifamily housing production fluctuated in March. In the Northeast, housing production rose 12.9 percent in March month over month, but dropped in other regions, posting a 16.2 percent decrease in the Midwest, a 16 percent drop in the West, and a 2.9 percent drop in the South, the Commerce Department reported.
Despite March’s nationwide drop, the National Association of Home Builders notes that overall housing production for single-family homes in the first quarter of this year is still 8.1 percent above the pace in 2016.
“The three-month moving average for single-family starts has reached a post-recession high, which shows that this sector is continuing to firm,” says NAHB Chief Economist Robert Dietz. “We can expect further gains in single-family production throughout the year, while multifamily starts should level off.”
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Housing permits—a gauge of future production—is holding promise for a turnaround. Permit issuance in March rose 3.6 percent to a seasonally adjusted annual rate of 1.26 million units, but that was all buoyed by a pickup in multifamily permits. Multifamily permits increased 13.8 percent to 437,000 units while single-family permits in March were down 1.1 percent to 823,000.