US single-family home construction drops by 5.7% as building permits decline

U.S. Single-Family Homebuilding Takes a Hit as Mortgage Rates Rise

In a recent report from the Commerce Department, it was revealed that U.S. single-family homebuilding experienced a significant decline in March. This drop comes at a time when new construction is desperately needed due to a severe shortage of previously owned houses for sale. However, the resurgence in mortgage rates is causing potential buyers to hesitate, leading to a slowdown in the housing market.

Chief economist at FWDBONDS, Christopher Rupkey, commented on the situation, stating that the housing recovery has stalled as home builder expectations of lower interest rates have not materialized. This lack of affordability is expected to drive home prices even higher without an increase in supply.

Single-family housing starts, which make up the majority of homebuilding, fell by 12.4% to a seasonally adjusted annual rate of 1.022 million units in March. While this is a significant drop, there was a 21.2% increase in single-family home building on a year-on-year basis.

The National Association of Home Builders (NAHB) reported that confidence among single-family home builders remained unchanged in April, with buyers waiting to see where interest rates are headed. The average rate on a 30-year fixed-rate mortgage has risen to around 7%, further impacting the housing market.

Overall, housing completions have also declined, with the number of houses approved for construction but not yet started increasing slightly. Realtors estimate that housing starts and completion rates need to be in the range of 1.5 million to 1.6 million units per month to address the inventory gap.

As the housing market continues to face challenges, it remains to be seen how policymakers and industry stakeholders will address the issue of affordability and supply in the coming months.