The pace of housing starts in March tipped a milestone, posting an annual rate of 1.04 million units, an increase of 7 percent from February and up 47 percent from a year earlier.
That figure from the Commerce Department marks the first time the housing industry crossed the 1 million mark since June 2008. Much of that gain was driven by rental demand, as apartment and condominium complex construction rose 27 percent from the previous month and jumped 82 percent from February 2012. The number of single-family homes, however, declined 4.6 percent from February to a rate of 619,000 units. The South posted most of the building activity for single-family housing, rising 10.9 percent from the previous month, followed by the Midwest, up 9.6 percent, and the West, up 2.7 percent. Starts in the Northeast region declined 5.8 percent.
Builder confidence, however, fell for the fourth consecutive month as the National Association of Home Builders/ Wells Fargo Housing Market Index dipped two points to 42 in April. Builders are grappling with the market’s growing pains as they come up against tighter supplies and rising costs for material, land, and labor.
“Supply chains for building materials, developed lots, and skilled workers will take some time to re-establish themselves following the recession; and in the meantime builders are feeling squeezed by higher costs and limited availability issues,” said David Crowe, chief economist for the NAHB, in a statement.
March building permit numbers may have reinforced the builders’ dimmer outlook for April. Permits slipped 3.9 percent compared with February to a seasonally adjusted rate of 902,000. However, that pace is 17.3 percent ahead of 769,000 permits for March 2012. Permits for single-family homes slipped 0.5 percent to 595,000 compared with February.
Fitch Ratings said in a statement after the industry posted strong housing starts last month that while there was opportunity for new construction to regain total share of the housing market, “a lack of finished lots in desirable locations during the next 12 to 15 months could hinder progress. Finished lots that are already graded and have infrastructure in place are becoming scarce, as development activity during the recent downturn was limited.”
Still, the housing starts number was higher than the expectations of analysts polled by Reuters, who projected a 930,000-unit rate. Although the March numbers are a mixed bag, the figures indicate “a continuation of the slow, methodical march forward,” said Crowe. NAHB’s three-month moving average for single-family starts remains unchanged at 628,000 units for March and on track for a 25-percent increase in new-home production in 2013.