US homebuilding near two-year low; permits extend decline

WASHINGTON: US homebuilding dropped to a near two-year low in March, pulled down by persistent weakness in the single-family unit segment, suggesting the housing market continued to struggle despite falling mortgage rates.
The second straight monthly decline in homebuilding reported by the Commerce Department on Friday probably reflected in part massive flooding in the Midwest, with housing starts in the region plunging to levels last seen in early 2015.
The weak report bucked a recent tide of upbeat data, including retail sales, trade and construction spending, that indicated the economy regained speed late in the first quarter after appearing to stumble at the turn of the year.
“Waiting for construction activity to pick up after a sharp drop in mortgage rates is like waiting for Godot,” said Chris Rupkey, chief economist at MUFG in New York. “It is hard to know what is ailing the home construction industry.” Housing starts fell 0.3 per cent to a seasonally adjusted annual rate of 1.139 million units last month, the lowest level since May 2017. Data for February was revised down to show homebuilding tumbling to a pace of 1.142 million units instead of the previously reported 1.162 million-unit rate.
Housing starts in the Midwest, which was devastated by floods during the month, dropped 17.6 per cent. Homebuilding also fell in the Northeast and South, but surged in the West.
Economists had forecast housing starts increasing to a pace of 1.230 million units in March. The dollar was trading lower against a basket of currencies. US stock and bond markets were closed for the Good Friday holiday.
A sharp pickup in home construction appears unlikely. Building permits fell 1.7 per cent to a rate of 1.269 million units in March, the lowest in five months. It was the third straight monthly decrease in permits.
The prolonged weakness in homebuilding is likely the result of land and labour shortages, as well as expensive building materials. A survey on Tuesday showed that though builders reported strong demand for new homes, they continued to highlight “affordability concerns stemming from a chronic shortage of construction workers and buildable lots.” — Reuters