Housing Starts Lag


Single-family construction fell 13.4% in April from March; almost all regions reported less construction activity; the West was flat on the month. Single-family construction is always key for the housing market. Shortages of existing homes for sale, especially at the lower end of the market, have contributed to the pressure on prices over the past year.

Building permits stalled in April as single-family permit losses were offset by multifamily gains. Only the Northeast and South recorded rising multifamily permits during April.

Supply-chain constraints are exacerbating shortages of homes available for sale. The silver lining is that lumber prices may have peaked in early May and begun to come down, but prices still have a long way to go before reaching pre-pandemic levels.

Buyer demand remains strong but rising unaffordability and bidding wars have depressed buyer sentiment to a 10-year low according to Fannie Mae. Less than 50% of buyers believe now is a good time to buy a home. The largest drop in sentiment came from those making $50,000-$100,000, influenced by the lack of supply at the entry level; that is despite higher saving levels and falling mortgage rates. Mortgage applications firmed at the start of May with both refinancing and new home purchase activity increases.




Bottom Line


Demand remains strong as the peak home-buying season opens. Lack of homes for sale in the most in-demand markets is pricing out some buyers. Shortages of land, labor and materials will keep builders constrained. We could see that ease up by the end of the year as prices start to come down from recent peaks.






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Copyright © 2021 Diane Swonk – All rights reserved.  The information provided herein is believed to be obtained from sources deemed to be accurate, timely and reliable. However, no assurance is given in that respect. The reader should not rely on this information in making economic, financial, investment or any other decisions. This communication does not constitute an offer or solicitation, or solicitation of any offer to buy or sell any security, investment or other product. Likewise, this communication serves to provide certain opinions on current market conditions, economic policy or trends and is not a recommendation to engage in, or refrain from engaging, in a particular course of action.


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