Builders indeed have been reluctant to ramp up production in recent years despite real estate sentiment, housing prices and overall home demand returning to pre-crisis levels. The tight supply and high demand have combined to inflate home values in certain parts of the country, pricing out lower-income, would-be homebuyers.
A sharper uptick in housing starts likely would help alleviate that trend, but April’s tally is expected to do much to move the needle.
“The faster recovery in households than in starts has pushed the number of vacant housing units down sharply – essentially down to the lowest levels since the late 1980s for rental units and to 2004 for owner-occupied units,” Berson said. “This has had the impact of pushing house prices and asking rents up sharply in recent years.”
Tuesday’s report also showed building permits issued for new projects declined by 2.5 percent over the month, though they were up a more respectable 5.7 percent over the year. Home completions, meanwhile, dropped 8.6 percent from March’s total but were up 15.1 percent from April 2016.
“April’s new construction numbers disappoint. All three of the major new construction [indicators] – permits, starts, and completions – fell from last month,” Ralph McLaughlin, chief economist at Trulia, wrote in a research note Tuesday. “The silver lining for new homebuyers is that most of the construction pullback is in the multifamily sector, where economists have been expecting an eventual slowdown given the charge of multifamily units coming out of the recession.”
Indeed, single-family starts were actually up 0.4 percent over the month and 8.9 percent on the year. But multifamily structures with five or more units – like apartment buildings – saw starts drop 9.6 percent over the month and 14.6 percent on the year.
A shortage of multifamily units could push rents higher in certain parts of the country, as landlords will be able to boost their asking prices without fear of being undercut. But the progress on the single-family front could help moderate home prices as interest rates – and thus mortgage rates – rise in the months ahead.
“Mortgage commitment rates continue to hover just above 4 percent despite the Federal Reserve’s increase to the federal funds rate target in March,” Kristin Reynolds, an economist at research and analysis outfit IHS Markit, wrote in a research note Tuesday. “New homes for sale remain below their long-term trend, and in March new homes sold at the second-fastest pace in nine years. We anticipate that housing starts will expand in 2017 at a faster pace than the prior year.”
Source: US News