Single-family Construction Activity Falters in March

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of single-family housing starts in March FELL 3.7 percent to a seasonally adjusted annual rate (SAAR) of 8967,000 units;
  • The rate of permits for single-family home permits filed in March also FELL, down 5.5 percent to an SAAR of 840,000 units;
  • The rate of permit filings for multi-family homes ROSE 19.0 percent in February to 514,000 units (SAAR); Permits for all housing ROSE 3.5 percent to 1.354 million units
  • The rate of all housing starts ROSE 1.9 percent in February to an SAAR of 1.32 million as multi-family starts improved 14.4 percent to 452,000.
  • The rate of home completions in March DECREASED 5.1 percent from February; Two-thirds of the decline came in from a 4.7 percent drop in single-family completions.

Trends:

  • The March report on single-family permits would have been worse had it not been for a slight downward revision to February data;
  • The seasonally adjusted annual rate of single-family permits dropped to its lowest level since September;
  • Permits for single-family homes represented 62.0 percent of all permits in March, the lowest share since January 2017;
  • At the same time single-family homes accounted for 65.7 percent of all starts, the lowest share since December 2016;

Data Source: Census Bureau and Department of Housing and Urban Development

Image result for home building

Builders may have been right to betray falling confidence in housing in the monthly Housing Market Index survey conducted by the National Association of Home Builders which slipped for the fourth straight month.

Builders were seeing what the data released by the Census Bureau and Department of Housing and Urban Development reported: reduced building activity. The housing data reinforced the old saw that “the plural of anecdotes is data.”

And the future for single-family housing continues to look discouraging as fewer single-family housing permits were filed in March. Thus, the dip in confidence is not a surprise although multi-family housing continues to keep builders active.

Just how much of the drop in single-family activity is attributable to the new tax law which reduced incentives for homeownership is arguable. But, the combination of reduced confidence and fewer construction jobs suggests the law of unintended consequences may be at work.

The tax cut may have put more money is wage earner pockets with reduced withholding rates, but the increased take-home pay is not going toward home buying.

The Census-HUD data also point to a further increase in the inventory of unsold new homes. The rate of new home sales has averaged about 615,000 in the last 12 months while builders are completing new homes at a rate of about 815,000 per month,

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

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