Housing starts fell to a seasonally adjusted annual rate of 1.215 million in March, 6.8% below the revised February rate of 1.303 million, but 9.2% above the March 2016 rate.
Construction in February had been supported by warmer-than-usual weather, and so the cool down in March was expected to affect homebuilding. Compared to the first three months of a year ago, construction is up 13.5% in the South, on strength in both single-family and multifamily units. But even with a wave of construction, a dwindling supply of new and existing homes across much of the country has threatened to become a major drag on the housing market. Building permits in March were at a rate of about 1.260 million, an increase of 3.6% compared with 1.216 million in February and an increase of 17.0% compared with 1.077 million in March 2016. The March rate for units in buildings with five units or more was 385,000.
Residential starts decreased 6.8% to a 1.22 million annualized rate from a 1.30 million rate in February.
"Today's numbers are aligned with our builder confidence metric, which contracted slightly this month but is on solid footing overall", said Granger MacDonald, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Kerrville, Texas. Authorizations of units in buildings with five units or more were at a rate of 401,000 in March.
But strengthening demand and builder sentiment have yet to generate enough construction to sufficiently boost the availability of homes. "Since this one-time event reduced the number of construction projects in the pipeline, we hope this will translate into more starts in the coming months". That trend could temper sales growth and weaken affordability, in part because the shortage of homes has pushed up prices.
While single-family permits fell 1.1 percent, they were not too far from the more than nine-year high reached in February.