U.S. Housing Starts Edged Higher in March, Defying Rising Rate Pressures
By Geoffrey Smith
Investing.com — The U.S. housing market stayed strong in March, despite increasing pressure on financing costs from higher capital costs.
Housing starts rose a seasonally adjusted 0.3% on the month and were up 8.9% from a year earlier to 1.793 million – their highest level since the subprime credit-fueled boom in 2006/7. Building permits, meanwhile, also edged higher to 1.873 million. That’s an increase of 0.4% from February and 6.7% from March 2021. Economists polled ahead of time had expected both numbers to tick down.
The housing market has been one of the ‘frothiest’ parts of the U.S. economy since the beginning of the pandemic, which triggered an abrupt switch in households’ preferences for space over locations in town and city centers.
Even so, the dynamic for multi-unit buildings continues to be much stronger than that for single-family homes. Multi-family unit starts rose 7.5% on the month, while single-family homes fell 1.7%.
Developments in multi-family units tend to be more volatile, and thus the underlying trend may not be quite as strong as the headline figure suggests, Oxford Economics’ Nancy Vanden Houten said in a note to clients.
So far this year, housing starts have risen 10.3% from a year earlier, with the Northeast showing the fastest growth, at 17.3%, and the South the slowest at 6.1%.
The boom that started in the pandemic has shown few signs of slowing down, even as the cost of borrowing for homeowners has risen increasingly quickly in recent months. Data from the Mortgage Bankers Association indicate that the average 30-year mortgage rate has risen from 3.30% at the end of last year to 5.13% as of last week. Further increases in the 30-year Treasury bond yield since then suggest that the benchmark mortgage rate will rise to its highest since 2009 in the coming weeks.
Other indicators, too, have suggested that the market should be due to cool down this year: the National Association of Homebuilders‘ housing market index peaked in November 2020 and has fallen for the last four months, although at 77, it’s still comfortably above its long-term average.
