New residential construction, including single-family and multi-family homes, fell by the most in four years as higher mortgage rates dampened housing activity.
The number of home starts fell 14.7% month-over-month in March, falling from an annual pace of 1.55 million units to 1.32 million units annually, according to Census Bureau data released Tuesday. Single-family starts fell 12.4% month over month.
According to LPL Financial's chief economist, Jeffrey Roach, the data suggests that new home construction is “beginning to show cracks in the pace of growth.”
“Housing construction is about to slow as potential homebuyers indicate that now is not a good time to buy a home. Investors should expect residential investment to become a drag on GDP growth in the coming quarters. Housing activity may not fully stabilize until the Reserve Bank Federal facilitation cycle.
The new government data comes after construction sentiment in April was flat from the previous month, breaking four consecutive months of gains. “Buyers are hesitant so they can better gauge which direction interest rates are headed,” NAHB said.
“Looking ahead, we continue to believe single-family construction will benefit from a shortage of used homes in the market, shifting demand to new construction,” Thomas Ryan, a real estate economist at Capital Economics, wrote in a note to clients after the release. .
“But this strength will be offset by weakness in multifamily housing starts, which we expect to remain around current levels, leaving total housing starts slightly higher than they currently are by the end of this year.”
The SPDR S&P Homebuilders ETF (XHB) was down more than 1% Tuesday morning.
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