New-Home Construction Slows, But Builders Call the Numbers ‘Deceiving’
Builders added fewer homes to the pipeline in February, but the National Association of Home Builders says the numbers may be misleading about the extent of the actual shortfall.
Total housing starts plunged 8.7 percent in February to a seasonally adjusted annual rate of 1.16 million units, the U.S. Commerce Department reported Tuesday. (The annual rate is the number of housing units builders would begin if they kept pace for the next 12 months.) Broken out, single-family homes starts dropped 17 percent to 805,000 units, while the multifamily sector rose 17.8 percent to 357,000.
But builders say the decrease in single-family home starts is down from an unusually revised high reading of 970,000 units from January.
“The overall lower starts numbers are somewhat deceiving given the revised single-family starts figure in January was at a post-recession high,” says Danushka Nanayakkara-Skillington, the assistant vice president of forecasting and analysis at the NAHB. “Absent the surge [in January], the drop in single-family production in February is not as huge as it appears. Still, builders continue to remain cautious due to affordability concerns, as illustrated by the flat permits data.”
Housing permits, a gauge of future housing production, fell 1.6 percent in February against January’s 1.30 million units. But single-family construction is holding at near the highest levels since prior to the recession, The Wall Street Journal reports.
Affordability factors, however, are still a top concern that is limiting housing growth, says Greg Ugalde, the NAHB’s chairman. “Excessive regulations, a scarcity of buildable lots, persistent labor shortages, and tariffs on lumber and other key building materials are having a negative effect on housing affordability,” he says.
Combined single-family and multifamily housing starts dropped by the highest percentages in the Northeast last month, falling 29.5 percent month over month. Housing starts dropped by 18.9 percent in the West and by 6.8 percent in the South. The Midwest, on the other hand, saw housing starts surge 26.8 percent in February, the U.S. Commerce Department’s data shows.
Source: National Association of Home Builders and “Home Building, New-Home Permits Have Softened This Year,” The Wall Street Journal (March 26, 2019)