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Constrained housing affordability conditions due to elevated interest rates, rising construction costs and labor shortages led to a reduction in housing production in March.

Overall housing starts decreased 11.4% in March to a seasonally adjusted annual rate of 1.32 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The March reading of 1.32 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 14.2% to a 940,000 seasonally adjusted annual rate over the month and are down 9.7% compared to March 2024. On a year-to-date basis, single-family starts are down 5.6%. The three-month moving average (a useful gauge given recent volatility) is down to 1.01 million units, as charted below.

The multifamily sector, which includes apartment buildings and condos, decreased 3.5% to an annualized 384,000 pace. The three-month moving average for multifamily construction has trended upward to a 381,000-unit annual rate. On a year-over-year basis, multifamily construction is up 48.8%.

On a regional and year-to-date basis, combined single-family and multifamily starts were 10.6% higher in the West, 8.6% higher in the Northeast, 3.3% higher in the Midwest, and 8.5% lower in the South.

The total number of single-family homes and apartments under construction was 1.4 million in March. This is the lowest total since July 2021. Total housing units now under construction are 15.2% lower than a year ago. Single-family units under construction fell to a count of 632,000—down 8.7% compared to a year ago. The number of multifamily units under construction has fallen to 759,000 units. This is down 20.0% compared to a year ago.

On a 3-month moving average basis, there are currently 1.5 apartments completing construction for every one that is beginning construction. While apartment construction starts are down, the number of completed units entering the market is rising due to prior elevated construction levels. Year-to-date, the pace of completions for apartments in buildings with five or more units is down 3.5% in 2025 compared to 2024. An elevated pace of completions in 2025 for multifamily construction will place some downward pressure on rent growth.

Overall permits increased 1.6% to a 1.48-million-unit annualized rate in March. Single-family permits decreased 2.0% to a 978,000-unit rate. Multifamily permits increased 9.3% to a 504,000 pace.

Looking at regional permit data on a year-to-date basis, permits were 4.7% higher in the Midwest, 0.4% higher in the South, 8.8% lower in the West and 24.7% lower in the Northeast.

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Mortgage rates declined marginally in February, with the average 30-year fixed-rate mortgage falling to 6.84%. After climbing steadily since December and peaking at 7.04% in mid-January, rates have been trending downward.

According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage decreased 12 basis points (bps) from January, while the 15-year fixed-rate mortgage fell 13 bps to 6.03%. Although the recent decline in mortgage rates and an increase in the total single-family homes supply are positive signs for buyers, homebuying activity may remain sluggish due to persistent high prices and mortgage rates still exceeding 6%.

The 10-year Treasury yield declined 11 bps to an average of 4.52% in February, reversing its recent upward trend. This shift reflects concerns over a weakening U.S. economy due to inflationary pressures and increasing geopolitical risks. In response, the markets anticipate that the Federal Reserve will resume rate cuts later in the year.

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Consumer confidence fell to a three-month low in December amid growing concerns about economic uncertainties, especially potential tariffs. These policy changes could derail inflation progress and lead the Fed to slow its easing pace.

The Consumer Confidence Index, reported by the Conference Board, is a survey measuring how optimistic or pessimistic consumers feel about their financial situation. This index fell from 112.8 to 104.7 in December, the largest monthly decline since August 2021. The Consumer Confidence Index consists of two components: how consumers feel about their present situation and about their expected situation. The Present Situation Index decreased 1.2 points from 141.4 to 140.2, and the Expectation Situation Index dropped 12.6 points from 93.7 to 81.1, just above the 80 threshold. Historically, an Expectation Index reading below 80 often signals a recession within a year.

Consumers’ assessment of current business conditions turned negative in December. The share of respondents rating business conditions “good” decreased by 2.5 percentage points to 19.1%, while those claiming business conditions as “bad” rose by 1.4 percentage points to 16.7%. However, consumers’ assessments of the labor market improved. The share of respondents reporting that jobs were “plentiful” rose by 3.4 percentage points to 37%, and those who saw jobs as “hard to get” decreased by 0.4 percentage points to 14.8%.

Consumers were less optimistic about the short-term outlook. The share of respondents expecting business conditions to improve fell from 24.7% to 21.7%, while those expecting business conditions to deteriorate rose from 15.9% to 18.3%. Similarly, expectations of employment over the next six months were less positive. The share of respondents expecting “more jobs” decreased by 3.7 percentage points to 19.1%, and those anticipating “fewer jobs” climbed by 3.4 percentage points to 21.3%.

The Conference Board also reported the share of respondents planning to buy a home within six months. The share of respondents planning to buy a home fell to 4.9% in December. Of those, respondents planning to buy a newly constructed home decreased to 0.4%, and those planning to buy an existing home dropped to 2.2%.

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