US Economy

New US home construction slows in March

Construction of new US homes dropped in March to its slowest pace in four months, with the pace of building falling sharply in the Mid-West, the Commerce Department reported Tuesday.

Construction of single-family homes in the US sank 6.2 percent in March 2017
Construction of single-family homes in the US sank 6.2 percent in March 2017 (AFP)

NEW YORK - Construction of new US homes dropped in March to its slowest pace in four months, with the pace of building falling sharply in the Mid-West, the Commerce Department reported Tuesday.

Analysts had been expecting a slowdown following a surge in construction during the unseasonably warm winter months of January and February.

But in a possible sign of changes to come, permits for new construction rebounded to their highest level since October, putting them up 17 percent over the same month in 2016.

For the month of March, total housing starts fell 6.8 percent to a seasonally adjusted annual rate of 1.215 million, accord to Tuesday's Commerce Department figures. A consensus forecast had called for a drop of only 2.9 percent.

Construction of single-family homes likewise sank 6.2 percent and in the Mid-West single-family homes tumbled 35 percent.

Overall, total home building was still well above its pace from a year ago, adding 9.2 percent over March of 2016.

Tuesday's figures also suggested some homebuilders may be turning away from serving the rental market, with March seeing a 6.1 percent drop in the construction of buildings with five or more units, the second consecutive decline.

Meanwhile, the level of housing permits stood at an annual rate of 1.26 million new houses, which Ralph McLaughlin of the real estate firm Trulia said was a sign of coming relief for would-be home buyers.

Analysts say the US economic recovery has produced an exceedingly tight housing market, with rising wages and steady job creation seeing more buyers enter the market and driving up prices.

Inventory has remained scarce, with industry observers pointing to the high cost of construction, a hot rental market and large share of suitable housing held by investment firms as reasons for the lack of supply.

"Permits are important because they are the earliest signals of long-run new housing supply," McLaughlin said in a research note.

"Homebuyers should rest assured that new home building will continue to relieve their supply constraint in the long-run."