By Lucia Mutikani
WASHINGTON (Reuters) -U.S. single-family homebuilding increased for a second straight month in March, while permits for future construction surged, offering some glimmers of hope for the depressed housing market ahead of the busy spring selling season.
Single-family housing starts, which account for the bulk of homebuilding, rose 2.7% to a seasonally adjusted annual rate of 861,000 units last month, the Commerce Department said on Tuesday. Data for February was revised higher to show single-family homebuilding rising to a rate of 838,000 units instead of the previously reported 830,000 unit-pace.
“Mortgage rates have pulled back from the peaks in October/November, helping to provide a jolt to demand and sales activity,” said Ben Ayers, a senior economist at Nationwide in Columbus, Ohio. “But the environment remains challenging with high input and labor costs for builders and expensive financing options for buyers.”
Single-family homebuilding increased 4.4% in the Northeast and soared 23.6% in the Midwest. It advanced 4.8% in the densely populated South, but plunged 16.0% in the West. Single-family housing starts dropped 27.7% on a year-on-year basis in March.
The Federal Reserve’s aggressive interest rate hiking campaign has pushed the housing market into recession, with residential investment contracting for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the 2007-2009 Great Recession.
There are, however, signs that the housing market is stabilizing at very depressed levels. A survey on Monday showed the National Association of Home Builders/Wells Fargo Housing Market index climbing to a seven-month high in April.
Mortgage rates have retreated from last year’s highs, with the rate on the popular 30-year fixed mortgage declining from a peak of 7.08% in early November to 6.27% last week, according to data from mortgage finance agency Freddie Mac.
But the recent financial turmoil following the collapse of two regional banks could result in banks and mortgage lenders tightening underwriting standards.
Starts for housing projects with five units or more decreased 6.7% to a rate of 542,000 units. Multi-family housing construction remains underpinned by demand for rental accommodation. But economists see limited scope for further gains noting an increase in empty apartments.
The inventory of multi-family housing under construction is at record highs.
With the decline in multi-family homebuilding offsetting the rise in single-family projects, overall housing starts fell 0.8% to a rate of 1.420 million units last month. Economists polled by Reuters had forecast starts falling to a rate of 1.40 million in March.
Single-family building permits jumped 4.1% to a rate of 818,000 units in March. Permits for housing projects with five units or more plummeted 24.3% to a rate of 543,000 units. Overall, building permits dropped 8.8% to a rate of 1.413 million units.
The number of houses approved for construction that are yet to be started declined 3.0% to 291,000 units. The single-family homebuilding backlog fell 2.3% to 130,000 units, the lowest level since February 2021, but the completions rate for this segment rose 2.4% to a rate of 1.050 million units.
The inventory of single-family housing under construction fell 2.3% to a rate of 716,000 units, the lowest level since August 2021.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)