Modest gains for U.S. home construction
April 21, 2015 - After a disappointing set of housing data last month, recent reports suggest a return to trend for home building as the U.S. enters the spring home buying season.
Home builders reversed a one-month decline in sentiment as the April NAHB/Wells Fargo Housing Market Index (HMI) increased four points to 56 in April from a one-point downwardly revised 52 in March. The bounce back up to the January-February average suggests the March observation was an outlier.
All three components of the HMI rebounded to or above the early part of 2015. The current sales index rose three points to 61, matching the February level and standing just one point below the January report. The expected sales component rose five points to 64, the highest in 2015, and the traffic component rose four points to 41. The solid and significant increase in expectations suggests builders are expecting the market to continue growing.
Consistent with this rebound in market sentiment, Census-estimated housing starts increased two per cent to a seasonally adjusted annual rate of 926,000 in March.
Single-family starts increased 4.4 per cent to a 618,000 rate. Multifamily starts dropped to a 308,000 pace, the lowest monthly rate since September 2013. Most of this decline in apartment construction was concentrated in the Western U.S.
Permits were down 5.7 per cent overall, mostly due to a 15.9 per cent loss in multifamily, evenly spread across three of the four regions. Northeast multifamily permits rose 55 per cent to 90,000, the highest since June 2008, when a code change caused a one-time jump. The remaining three regions accounted for a 108,000 fall, offsetting the 48,000 increase in the Northeast. Single-family permits rose 2.1 per cent to a 636,000 rate, with only the West showing a decline of two per cent or down 3,000 to a 146,000 permits pace for March.
Builders continue to be concerned about lot availability and, to a lesser extent, access to labour. The rising cost of these scarce resources and the rising cost of materials continues to squeeze builders’ profits. Despite recent easing in prices, for example, gypsum prices remain well above levels recorded during the boom years.
For additional analysis regarding the latest housing news, be sure to check out the most recent posts from NAHB’s economics blog Eye on Housing.