• Housing starts and permits fell in March driven by big declines in the multifamily segments.
• Completions should increase through 2023 as labor shortages decline and supply-chains improve.
• PNC forecasts a 10% year-over-year decline in house prices this year.

U.S. housing starts fell 0.8% in March to 1.420 million annualized units from 1.432 million in February (revised lower from 1.450 million). This was better than consensus expectations for a 3.5% decline. Single-family starts rose 2.7% in March to 861,000 from 838,000 in February while multifamily starts fell 5.9% to 559,000 from 594,000.

The number of residential construction permits, a leading economic indicator fell 8.8% on the month. Single-family permits rose 4.1% while multifamily permits fell by a big 22.1%. The backlog of new construction reduced slightly in March but remains near the highest level since 1974. Building completions fell slightly in March but they are over 11% above the December 2022 level. Completions should increase through 2023 as labor shortages decrease and supply-chain issues improve.

Starts and permits fell in March after surprise increases in February. Despite the declines in March, starts and permits were up in the first quarter of 2023. In a separate report released yesterday, homebuilder confidence as measured by the NAHB Market Index rose for the fourth straight month in April although the index remains below the break-even measure of 50.

With the Federal Reserve pledging to keep interest rates elevated through 2023 and an increased likelihood of tighter lending standards after bank failures in March, the housing market will likely be in recession through this year. PNC forecasts a 10% year-over-year decline in house prices in 2023.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance, and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.