Housing starts were 1.42 million, compared with the revised upwards of 1.32 million. Permits fell to 1.413 million, down from a revised upwards of 1.55 million in February.
Builders have been taking advantage of the shortage of homes available for sale to build new homes, which has helped boost the housing market. In many parts of the nation, February was also warmer than normal.
Kelly Mangold of RCLCO Real Estate Consulting said that March was a month of economic uncertainty. The news of failed banks may have scared some buyers. As spring has historically been a popular time for sales builders, they will likely increase their inventory to capture buyers who may have been sidelined in the past but are now looking to enter the market.
The National Association of Home Builders reported on Monday that builder confidence increased by one point to 45 in April. This number is still weak.
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“Builder confidence increased for the fourth consecutive month due to a shortage of resale inventories despite high interest rates,” stated NAHB Chairman Alicia Huey. Huey is a custom homebuilder and developer in Birmingham, Alabama. Builders note that further declines in mortgage interest rates to below 6% will increase demand for housing. The industry is still plagued with issues relating to building materials, such as the lack of electrical transformer equipment.
Many homeowners are still paying off mortgages taken out when the coronavirus epidemic was raging. At that time, mortgage rates were around 3%. That’s about half what they are today. This makes homeowners reluctant sellers, as they know it will be more expensive to buy a new house.
Odeta Kush, Deputy Chief Economist at First American Title Insurer, said that the shortage of existing home inventory is one of the factors behind the higher builder sentiment. The lack of an existing list could lead to more buyers turning to the new home market. And while three months of higher home builder sentiment may indicate a turning point for single-family homebuilding, builders continue to face headwinds in the form of higher construction costs and an affordability-constrained housing market.”
In April, consumer sentiment increases. George Ratiu is the chief economist at Keeping Current Matters. He said that new homes are often more affordable than older ones, but they still offer options to potential homebuyers.
Ratiu stated that “new residential construction reflects a housing market adjusting to the new reality of rising interest rates, shifting costs and continued monetary contraction.” “Overall, construction activity decreased in March. However, there was a noticeable shift towards single-family homes.”
Powell will deliver his twice-yearly economic and monetary policy report to the House Financial Services Committee on Wednesday, then repeat his remarks to the Senate Banking Committee on Thursday.
The markets will be watching Powell for any guidance on the future direction of interest rates. After all, inflation is still well above the Fed target of 2% per year, and the labor market remains tight by historical standards.
Powell’s remarks come during a week that housing data have dominated. The Census Bureau and the Department of Housing and Urban Development announced on Tuesday that residential construction increased in May.
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Building permits rose by 5.2% to a level of 1.491 million. Housing starts increased 21.7%. The National Association of Home Builders announced on Monday that their monthly confidence index had risen five points to 55 and was now solidly positive.
Robert Dietz, NAHB’s chief economist, said that a bottom was forming in single-family housing as builder sentiment has continued to rise since the start of the year. This month, both the current and the future components of the HMI exceeded 60 for the first time since the beginning of the year as buyers adjusted to the new interest rate normal. It is good news that the Federal Reserve is nearing the end of its tightening cycle. This will also have a positive impact on future market conditions, including mortgage rates and costs of financing for builders and developers.
The lack of supply has benefited new home sales as existing homeowners refuse to sell their homes and are unwilling to give up the low-rate mortgages they took out in the last few years. The report on May housing sales is due Thursday, with analysts expecting a slight drop from the April level.