A shortage in housing inventory has been a characteristic of the national housing market for some time now and while inventory is creeping up in some local real estate markets, US housing starts fell at the beginning of 2019.
US Housing Starts in February 2019
February was to bring with it a total of 1.21 million housing starts based on the 1.23 million starts in January. However, the actual total was much lower, coming in at 1.162 million, according to the Commerce Department. That was an 8.7% drop, which was the biggest decline in US housing starts in 8 months. The construction of single-family homes, specifically, dropped 17% to a rate of 805,000 units, a one and a half year low. This is actually the lowest level in single-family homebuilding since May 2017 and the largest drop since February of 2015. There was also a drop in building permits of 1.6%, totaling 1.296 million units in February. This makes for the second consecutive month where building permits declined.
Experts attribute this drop to market seasonality and believe that bad weather is the cause for the decline in housing starts.
What Does This Mean for the US Housing Market?
This drop in US housing starts was actually forecast to happen by economists and real estate experts and comes as no surprise. This prediction was due to the trends witnessed in the housing market last year. Mortgage rates were continuously increasing, lumber was expensive, and there was a shortage of land and labor. This resulted in the national housing inventory shortage as well as the rise in property prices. As these trends continued, it was normal to see US housing starts fall in February of 2019.
However, the tides are slowly changing for the real estate market. For one, even though there was a drop in building permits, they are currently outpacing housing starts. This means that starts and construction are likely to get a boost in the coming months. Single-family home construction may have fallen, but building permits for this type of property didn’t decline. This signals the construction in this real estate sector will also pick up in the months ahead. Multi-family housing starts actually rose up by 17.8% even though permits were down by 4.2%.
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In addition to this, mortgage rates are dropping. Last week, the 30-year fixed-rate mortgage averaged at 4.28- the lowest it has been in over a year, according to Freddie Mac. The growth in property prices is also slowing down across the nation. So as US housing starts rise back up as we move through 2019, the national real estate market is forecast to improve.
Still, issues in real estate construction remain. Even as US housing starts are set to increase, it’s not likely to come in the more affordable end of the real estate market. The major issues among homebuilders, according to a recent survey, is a lack of skilled workforce as well as land and zoning restrictions across many major US cities.
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