Housing starts dropped 6.8% in March to a seasonally adjusted annual rate of 1.215 million from February's upward-revised estimate of 1.303 million, the Commerce Department reported Tuesday. March's figure is up 9.2% year-over-year.
Building permit authorizations, an indicator of future construction activity, moved back into positive territory in March, rising 3.6% from February's upward-adjusted rate of 1.216 million to 1.260 million for the month, and coming in 17% above the year-ago mark.
Single-family starts cooled in March, declining 6.2% to 821,000 from February's upward-adjusted rate of 875,000, but they came in 9.3% ahead of March 2016's figures. Multifamily starts continued to decline, falling 6.1% from February's upward-revised rate of 410,000 to 385,000 starts in March. Multifamily starts are 9.1% ahead of a year ago.
March's starts figures came up short of analyst expectations, according to MarketWatch, which noted, however, that the number of single-family homes under construction during the month was the highest since September 2008. That, along with a boost in building permit authorizations for the period could mean more growth in single-family residential construction is ahead.
Busy job sites this spring are one indicator of the overall optimism in the sector, but continued growth in material prices, rising mortgage rates and the persisting lot and labor shortage could dampen homebuilding activity throughout 2017.
One indicator that supply- and demand-side headwinds may already be wearing on builders is the three-point decline in the National Association of Home Builders/Wells Fargo Housing Market Index to a reading of 68 in April from a post-recession record-setting mark of 71 in March. Both figures are well above the breakeven mark of 50.
Continued growth in lumber prices due to uncertainty around the expired U.S.-Canada softwood lumber deal is of particular concern. Softwood lumber prices rose 2.3% in March and are up 12.9% year-over-year with prices for some products in the category up 25% since March 2016.
The U.S. International Trade Commission is expected to announce its decision on applying countervailing duties for Canadian softwood lumber imports next week, which intends to spur domestic production but could further challenge pricing in the near-term.
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