to the Fastest Pace Since 2006

• Housing starts in March rose by a small 0.3% to 1.793 million annualized units from the upwardly revised 1.788 million annualized units in February.
• Pent-up demand and constrained inventories will continue to be the leading themes in the housing sector this year.
• Housing permits in March edged up 0.4% to 1.873 million annualized units from the upwardly revised 1.865 million annualized units in February.

According to the U.S. Department of Commerce, housing starts edged up 0.3% in March to 1.793 million annualized units, the fastest pace since 2006, better than consensus expectations for a 2.7% decline to 1.740 million annualized units. Starts in February were revised slightly higher to 1.788 million from 1.769 million. Single-family starts fell 1.7% while multi-family starts rose 4.6%. 

Residential construction permits were up 0.4% to 1.873 million in March; February permits were revised higher to 1.865 million from 1.859 million. Single-family permits fell 4.8% to 1.147 million. Multi-family permits rose 10% to 726,000. Building completions increased by 5.7% in March.

Housing starts and permits unexpectedly rose in March despite the recent sharp increase in borrowing costs. Builder confidence remains in great shape; the NAHB Market Index registered at 77 in April, a seven-month low but still well above the 50-point threshold. Additionally, the continued recovery of the labor force and supply-chain networks are positive factors that will support housing supply this year. Job growth, income growth, and strong demographic trends will support demand.

However, with the Fed expected to tighten monetary policy aggressively this year, mortgage rates are set to rise even higher, but buyers will remain resilient in the near term due to healthy balance sheets. The demand-supply imbalance will improve but it will continue to be a sellers’ market for some time. Overall, pent-up demand and constrained inventories will continue to be the leading drivers of house price growth this year.

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