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Home Starts Slow to More Sustainable Pace in March
New-home construction cooled in March, dipping 7.8% to a seasonally adjusted annual rate of 1.960 million, the Commerce Department reported on April 18.
Unseasonably good winter weather helped spur housing starts earlier this year, with production rising to a yearly rate of 2.131 million units in the first quarter, the strongest quarter yet in the current expansion and most likely its peak.
Single-family housing starts declined 12.0% last month to a pace of 1.591 million units, with an average for the first quarter of 1.749 million units, also a cyclical high. Multifamily construction, on the other hand, climbed 15.7% to a rate of 369,000 units, and the first-quarter average was a robust 382,000 units.
“Builders are seeing a softening in demand because of rising interest rates, affordability issues and a reduced presence of investors/speculators in the housing market,” said NAHB President David Pressly. “Builders understand that the market is cooling off from the frenetic pace of the last several years and are adjusting accordingly.”
“The sizeable declines in housing starts for March partly reflected a return to more normal weather patterns, but it’s clear that builders are adjusting their production levels to the lower levels of demand evident in the market,” said NAHB Chief Economist David Seiders.
“We should see some further declines in starts as the year progresses, but we’re expecting an orderly transition to more sustainable levels rather than an abrupt housing contraction,” Seiders added. “NAHB expects housing starts to decline by about 6% for 2006 as a whole, mainly because of a reduced role for investors/speculators.”
All four regions reported decreases in housing starts in March, with construction of new homes and apartments down 0.5% in the Northeast, 4.8% in the South, 8.2% in the Midwest, and 15.5% in the West.
The number of building permits issued in March fell 5.5% to a seasonably adjusted rate of 2.059 million, with single-family permits down 6.9% to an annual rate of 1.542 million and multifamily permits down 0.1% to 517,000 units.
Want to Know the Housing Starts Through 2014?
Find out in HousingEconomics.com’s Long-Term Forecast. HousingEconomics.com includes downloadable Excel tables featuring the housing starts forecast, GDP, demographics and more.
To learn more, visit www.housingeconomics.com.
Seiders Predicts 'Soft Landing' on the NAHB Economics Blog
NAHB Chief Economist David Seiders says a "soft landing for housing is still in the cards" on NAHB's economics blog, “Seiders on Housing” — an informal Internet-based forum dealing with economic issues, housing trends, survey research and other topics affecting the housing sector of the economy.
Log onto the blog at http://nahbblog.blogs.com and get direct access to Seiders' expert opinions, projections and responses. Then let Seiders know what you think by giving your perspective.
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