U.S. home construction hit a 15-year high in March, but rising timber prices amid supply constraints could limit builders’ ability to increase production and ease the shortage of homes that threatens to slow the real estate market .
The sudden recovery reported by the Commerce Department on Friday added to solid March retail sales, suggesting the economy screamed after a brief weather-related riot in February. The rise in COVID-19 vaccinations, warmer weather and massive fiscal incentives are driving the economy, and growth this year is expected to be the strongest in almost four decades.
But caution is beginning to creep in among consumers, as the evolution of the pandemic remains uncertain and inflation shows signs of warming. Other data on Friday showed that consumer sentiment rose moderately in early April.
“We are in a unique situation, with the economy starting to recover from the worst pandemics,” said Robert Frick, a corporate economist at the Navy Federal Credit Union in Vienna, Virginia. “Uncertainties remain, many companies have not yet reopened, unemployment is still high and COVID-19 levels are lower, but persistent.”
Home starts rose 19.4% to a seasonally adjusted annual rate of 1.739 million units last month, the highest level since June 2006. Economists surveyed by Reuters estimated the start to rise at a rate of 1.613 million units. units in March.
The beginning increased by 37.0% compared to the previous year in March. Home construction fell in February as large parts of the country collapsed from unusual cold weather, including winter storms in Texas and other parts of the overpopulated region.
Innovative activity increased in the Northeast, Midwest and South, but decreased in the West. Permits for future housing construction rose 2.7% to a rate of 1.766 million units last month, recovering only a fraction of the 8.8% drop in February. They jumped by 30.2% compared to March 2020.
“While housing demand is expected to remain strong, we expect it to decline somewhat as the year progresses,” said Doug Duncan, chief economist at Fannie Mae in Washington. “Home builders continue to face supply constraints, including rising prices for timber and other materials.”
Shares on Wall Street were largely higher, the S&P 500 index (.SPX) and the Dow Jones industrial average (.DJI) hit new highs. The dollar (.DXY) slipped on a basket of currencies. US Treasury prices were lower.
RECORD CAR PRICES
The real estate market is fueled by the demand for larger and more expensive accommodations, with millions of Americans continuing to work from home, and distance schools remaining in place as the pandemic enters its second year. The supply of housing was insufficient, with the inventory of previously owned houses at record lows. This underlies the construction of houses.
A survey by the National Association of Home Builders on Thursday showed that confidence among single-family home builders rose in April amid heavy buyer traffic. Builders have called for solutions “to increase the supply of building materials as the economy gets hot in 2021”.
Inflation concerns were in the minds of consumers earlier this month. A separate report from the University of Michigan on Friday showed that the preliminary consumer sentiment index rose to 86.5 from the last reading of 84.9 in March.
Economists had predicted that the index would rise to 89.6.
The survey’s one-year inflation expectation jumped to 3.7%, the highest level in nearly a decade, from 3.1% in March. Its five-year inflation outlook remained unchanged at 2.7%.
This month’s reports showed large increases in both consumer and producer prices in March, as strong domestic demand pushed supply constraints. Federal Reserve Chairman Jerome Powell and many economists believe higher inflation is transient, and supply chains are expected to adjust and become more efficient.
Supply disruptions due to coronavirus restrictions lead to rising commodity prices. Softwood lumber, which is used for frames and farmhouses, rose by a record 83.4% from a year earlier in March, according to the latest producer price data released last week. Prices for other building materials, such as plywood, have also risen sharply.
West Coast port congestion, as well as Canada’s winter weather, which closed factories and restricted truck transportation, also contributed to the lack of rising construction materials prices, according to a survey by the Institute. for Supply Management published earlier this month.
Construction of single-family homes, the largest share of the real estate market, rose 15.3% to a rate of 1.238 million units in March. However, the beginnings remained below the peak of December last year, probably constrained by more expensive building materials.
Single-family building permits increased by 4.6%, to a rate of 1.199 million units.
“The failure of the single family is beginning to fully recover from last winter’s highs, despite strict inventories in most metropolitan areas, supporting the idea that builders are holding back,” said Chris Low, chief economist at FHN Financial in New York.
Start-ups for the multi-family volatile segment increased by 30.8% at a rate of 501,000 units. Building permits for multifamily housing projects decreased by 1.2%, to a rate of 567,000 units.
Home renovations accelerated by 16.6% to a rate of 1.580 million units last month, the highest since March 2007. Single-family home completions rose 5.3% to a rate of 1.099 million, the highest since November 2007.
Realtors estimate that start-up and completion rates for single-family homes should be between 1.5 million and 1.6 million units per month to reduce the inventory gap.
The housing stock under construction increased by 0.8% to a rate of 1.306 million units, the highest since September 2006.
Our standards: Thomson Reuters’ principles of trust.