New home construction in the United States slowed last month as stabilizing interest rates gave way to a lull in housing demand and cautious builders.
Residential starts fell 14.7% in March to an annualized rate of 1.32 million, the lowest since August, according to government data released Tuesday. That figure was lower than all estimates in a Bloomberg survey of economists.
Building permits, which indicate future construction, fell to 1.46 million in March. Housing starts and permits were revised upwards in February.
Single-family home construction saw the biggest decline in about three years, while the pace of multi-family housing starts fell to its lowest level since the start of the pandemic. Permits for both have also fallen.
After ramping up construction in recent months, builders may be taking a breather. The inventory of new homes for sale is almost the highest since 2008.
The housing starts report showed that the number of single-family homes already under construction reached its highest level since May, so builders may not be looking to break ground on more housing. Likewise, completions have declined, indicating that builders are focusing on ongoing projects.
These figures represent a flaw in the national recovery of the real estate market. Mortgage rates have largely stabilized around 7%, and potential buyers and sellers are only slowly beginning to accept this as the new normal.
Sentiment is similar among builders, as an industry group gauge stabilized in April, citing hesitation among buyers as they try to gauge the direction of mortgage rates. Given recent robust inflation and labor market numbers, investors are not hopeful that the Federal Reserve is about to cut interest rates.
California Daily Newspapers
