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In March, the construction of single-family homes in the United States increased for the second consecutive month. Additionally, permits for future construction saw a significant increase, which could be a positive sign for the struggling housing market as the busy spring selling season approaches. The Commerce Department reported these improvements last week, and it’s believed that the rise in single-family housing is due to buyers taking advantage of lower mortgage rates. A survey on Monday also indicated that declining mortgage rates and a limited supply of previously owned homes are supporting the housing market.
According to Ben Ayers, a senior economist at Nationwide in Columbus, Ohio, the recent decline in mortgage rates has contributed to an increase in demand and sales activity. However, the housing market still faces challenges such as high input and labour costs for builders, as well as expensive financing options for buyers.
In the Northeast, single-family homebuilding saw a 4.4% increase, while in the Midwest, it soared by 23.6%. The South also experienced a rise of 4.8%, but the West saw a significant decline of 16.0%. On a year-on-year basis, single-family housing starts decreased by 27.7% in March.
Last month, the increase in single-family construction was not enough to offset the decrease in multi-family homebuilding, resulting in a 0.8% decline in overall housing starts to a rate of 1.420 million units. Economists surveyed by Reuters had predicted that starts would fall to a rate of 1.40 million in March. Single-family building permits, however, rose to a five-month high of 818,000 units, increasing by 4.1% in March.
The permits for single-family homes grew in the Northeast, South, and West regions, but remained unchanged in the Midwest. Meanwhile, permits for housing projects with five or more units soared by 24.3% to a rate of 543,000 units. However, building permits for all types of housing projects dropped by 8.8% to a rate of 1.413 million units.
The number of approved houses for construction that have not yet started building decreased by 3.0% to 291,000 units. Within the single-family homebuilding category, the backlog also fell by 2.3% to 130,000 units, marking the lowest level since February 2021, while the rate of completions for this segment increased by 2.4% to a rate of 1.050 million units. Additionally, the inventory of single-family homes being constructed declined by 2.3% to a rate of 716,000 units, which is the lowest level since August 2021.
The Federal Reserve’s steep interest rate increases have led to a recession in the housing market, with residential investment decreasing for seven consecutive quarters. This marks the longest such streak since the housing bubble collapse that caused the recession. Although the housing market remains at a low level, there are indications that it’s stabilizing.
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