US homebuilding slowly picks up
Word from the U.S. Census Bureau, which released the latest figures on U.S. housing construction, was at once disappointing and worthy of optimism. That's because the Bureau's report found new construction starts for residential property fell in March, but at the same time, more building permits were issued for projects down the pipeline. On balance, economists see this as proof that the housing market is still growing, albeit at a somewhat sluggish pace.
According to the Census Bureau's estimates, the number of housing starts fell 6.8 percent in March to a seasonally adjusted annual rate of 1.22 million. While this figure is 9.2 percent higher than the same month last year, it still missed projections made by a consensus of economists by about 20,000 homes.
Single-family starts, among the most important categories contained in the report, fell by 6.2 percent in March. But this came after a better than average showing in February, which has since been revised even higher to an annual rate of 875,000.
While the raw number of new homes built in March was lower on a monthly basis, more permits for new construction were issued compared to February. On a month-to-month basis, permit issues were up 3.6 percent, and 17 percent on the year.
As MarketWatch explained, this combination of continued strength in single-family homebuilding, along with a growing number of building permits, combines to produce an overall positive picture of the U.S. housing market.
"Many economists believe a stronger pace of single-family home construction is a sign of a sturdier housing market and an economy supportive of homeownership," MarketWatch reported. "Americans seem ready to buy: inventories of previously-owned homes can't keep up with demand, and the Realtors industry association has urged builders to pick up the pace."
Larger economic uncertainty remains
Still, few real estate market analysts are celebrating this new data as a major victory. Rather, it leaves many questions regarding the long-term health of the housing market unanswered. As MarketWatch pointed out, even after recent months of strong building activity, residential construction remains below historical averages. This is true despite what many researchers see as a lack of housing supply compared to the demand for it from buyers. According to Reuters, homebuilders say rising materials prices, difficulty finding land and a dearth of skilled labor have also squeezed the industry.
Since home building and real estate makes up an outsized portion of the U.S. economy, this latest building report did not bode well for overall projections of long-run growth. Other research released April 18 found that retail sales and consumer prices had hit a slump, too, giving economic policymakers like the Federal Reserve some second thoughts on interest rates.
"The economy seems to have hit a soft patch in the first quarter and Fed officials are likely to wait to see the rebound before raising rates again," said Chris Rupkey, chief economist at MUFG Union Bank in New York, speaking to Reuters. "The clouds from the outlook skies may not lift until late this summer."
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