The number of permits increased 13.8% to an annualized rate of 1.5 million. January’s numbers were revised upwards. The number of building starts rose 9.8% from 1.32 million to 1.45 million, an annualized rate.
However, the level of activity is still 18% lower than a year earlier. Multi-family construction accounted for a large part of the growth. The South and West saw the largest increases.
Lisa Sturtevant is the chief economist at Bright MLS. She said that “the uptick this month reflects rebounding demand from homebuyers and improved builder’s confidence.” Recent troubles in the banking sector could, however, dampen the momentum in the new housing industry.
The National Association of Home Builders/Wells Fargo Housing Market Index, released on Wednesday, shows that builder confidence increased by two points in March. This was the third consecutive month of increased builder sentiment.
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“Even though builders are still dealing with high construction costs and disruptions in the material supply chain, they continue reporting strong pent-up demand, as buyers wait for interest rates to fall and turn more to new home markets due to a lack of inventory,” said NAHB chairman Alicia Huey. She is a custom homebuilder and developer based in Birmingham, Alabama. Builders are concerned about the short- and long-term prospects due to recent concerns over the stability of the banking system and the volatility of interest rates.
The survey revealed that builders are relying heavily on incentives to help them sell their homes. 31% reported they had reduced prices in March. This is the same percentage as February, but it’s lower than what was said at the end of last year.
Odeta Kush, Deputy Chief Economist at First American Title Insurance, stated that the conditions were still “poor” but that the improvements indicate builders feeling cautiously optimistic.
Stocks fall on more banking fears. Kushi said that the shortage of homes for sale is one of the factors driving the increase in builder sentiment. The lack of existing inventory 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.”
Kelly Mangold of RCLCO Real Estate Consulting said, “On a good note, existing homes are at record lows, which gives new homes less competition, and they’re often the only option for motivated buyers.”
She said: “We’re currently in an economic period of uncertainty. It is possible to see improvements as we progress through the year, or for that start to experience a continuing decline if we go into a real recession.”
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