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The construction of single-family homes slowed last month as builders complain of numerous headwinds that are limiting their ability to add more inventory. Ongoing supply chain bottlenecks continue to delay construction projects and raise homebuilding costs, builders say.
Also, rising mortgage rates—with the 30-year fixed-rate mortgage now averaging over 5%--as well as higher new-home prices are beginning to soften demand.
Both single-family housing starts and permits—a gauge of future construction—fell in March, the Commerce Department reported Tuesday. But an uptick in multifamily housing production helped overall housing starts to rise by 0.3% in March to a seasonally adjusted annual rate of 1.79 million units. Broken out, single-family starts fell 1.7% while the multifamily sector—which includes apartment buildings and condos—climbed 4.6% on an annual basis.
“Higher mortgage interest rates and rising construction costs are pricing buyers out of the market, and these higher costs are particularly hurting entry-level and first-time buyers,” says Jerry Konter, chairman of the National Association of Home Builders. Builders have called on policymakers to address building supply chain disruptions so that builders can bring construction costs down and increase production to meet market demand.
Single-family permits authorized but not started rose 14.6% year-over-year as higher construction costs and material delays slow previously permitted projects, NAHB notes.
Builder sentiment in the single-family home market has declined for four consecutive months as affordability conditions worsen. “The shift in affordability can be seen in the March data with the strength for multifamily construction and some weakness for single-family permits,” says Robert Dietz, chief economist for NAHB.