US housing starts rise unexpectedly in March; building permits are rising

A contractor stacks roofing materials while working on a home under construction in the Toll Brothers Bowes Creek Country Club community in Elgin, Illinois.

Daniel Acker | Bloomberg | Getty Images

Housing construction in the United States rose unexpectedly in March, but the starting shot for single-family homes fell under rising mortgage rates.

Home construction rose 0.3% to a seasonally adjusted annual rate of 1.793 million units last month, the Department of Commerce said Tuesday. Data for February were revised higher at a rate of 1.788 million units from the previously reported 1.769 million units.

Economists polled by Reuters had predicted starting to slide at a rate of 1.745 million units. Permits for future housing construction rose 0.4% at a rate of 1.873 million units last month.

The 30-year fixed-rate mortgage was averaging 5.0% in the week ending April 14, the highest since February 2011, up from 4.72% in the previous week, according to data from mortgage lender Freddie Mac. Further increases are likely when the Federal Reserve takes an aggressive monetary policy stance as it fights sky-high inflation.

In March, the Fed raised its policy rate by 25 basis points, the first increase in more than three years. Economists expect the US Federal Reserve to raise interest rates by 50 basis points next month and soon begin trimming its asset portfolio.

Rising borrowing costs are combined with higher house prices to reduce the affordability of first-time buyers. The National Association of Home Builders / Wells Fargo Housing Market Index fell to a low of seven months in April, with builders blaming “the jump in mortgage rates and persistent supply chain disruptions.”

Nevertheless, a record low housing supply should continue to support housing construction this year. There is a record backlog of houses approved for construction, which has not yet begun.

Goldman Sachs estimates that housing starts will rise 5% to 1.7 million this year, arguing that “when housing markets are tight as they are today, homebuilders are likely to keep building because they should have little fear that homes will be left empty after completion. “

Implementation of single-family homes, which account for the largest share of residential construction, fell 1.7% to a rate of 1.200 million units in March.

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