US: Housing Starts strong ahead of the recent spike in mortgage rates – Wells Fargo

Data released on Tuesday showed better-than-expected numbers on housing starts and building permits for March, also February’s numbers were revised higher. Analysts at Wells Fargo point out that the data puts home building on firmer footing ahead of the recent spike in mortgage rates.

Key Quotes: 

“Single-family construction appears to be losing a little momentum, with starts declining 1.7% in March and permits falling 4.8%. Permits over the past three months are now running slightly below the three-month trend in starts. By contrast, the three-month average of multifamily permits is running 23.8% ahead of starts, suggesting there are still plenty of projects in the pipeline.”

“The strength in housing starts at the start of 2022 likely reflects some easing in supply constraints that have plagued home builders during the pandemic. While shortages still exist, many builders have found workarounds and many firms have stockpiled key materials. Labor is also more plentiful, as evidenced by the recent strength in construction employment. The reopening of economies in the Northeast and West Coast has likely brought out more workers, which has allowed more projects to move forward.”

“In an unusual quirk, the number of single-family homes currently under construction is also 811,000 units on a seasonally-adjusted annual rate basis. The number of single-family homes under construction is the highest it has been since November 2006. While high, the pace of single-family construction appears to be demand-driven, with much of the current pipeline of homes under construction already sold. Inventories of completed single-family homes remain near all-time lows.”