US. homebuilding soared to a near 15-year high in March indicating residential construction in the world’s largest economy is recovering strongly following a winter storm-related setback.
The US Commerce Department reported on Friday that residential starts soared 19.4%in March to a 1.74 million annualized rate. March’s figures were the highest since 2006 and exceeded market forecasts for a rate of 1.61 million.
The figures suggest that US construction is back on track and that homebuilders are making progress on construction backlogs caused by solid housing demand during the Coronavirus pandemic and harsh winter weather. In February, large parts of the US suffered from unseasonably cold weather. The hardest hit was Texas and other parts of the South region with dense populations.
Despite home sales softening since October, they are still at levels higher than before the pandemic hit. This indicates that construction activity in the US will remain strong for the near future at least.
Strong Data and Optimistic Future
Adding further weight to an optimistic future was building applications data. Applications to build, a strong indicator for future construction, rose 2.7% to an annualized 1.77 million units.
Elsewhere, the government data revealed that single-family starts increased 15.3% in March to an annualized 1.24 million, near its 2006 peak. Meanwhile, the number of all types of homes authorized for construction but not yet started increased in March to 217,000, the highest it has been since August 2006
Doug Duncan, chief economist at Fannie Mae in Washington expects the strong momentum to die down as the year progresses:
“While housing demand is expected to remain strong, we expect it to diminish somewhat as the year progresses,”
“Homebuilders continue to face supply constraints, including increasing prices of lumber and other materials.”
Doug Duncan
All eyes will now be on the March data for existing and new home sales which will be released in the coming week.
