Home builders are hard at work attempting to bridge the broad gap between supply and demand in the nation’s housing market.
Privately-owned housing starts rose 22.3 percent year-over-year in February, according to a monthly report from the U.S. Census Bureau. The seasonally adjusted annual rate of nearly 1.77 million housing starts was up 6.8 percent from January’s revised estimate. Single-family housing starts jumped 5.7 percent from the previous month.
More homes appear to be in the pipeline, too. According to the Census Bureau, building permits for privately-owned housing units rose 7.7 percent year-over-year in February, though they dropped 1.9 percent from January.
While construction is commencing on more new homes, builders are having a difficult time finishing those already in progress. Privately-owned housing completions hit a seasonally adjusted annual rate of 1.31 million in February, the report showed, up 5.9 percent from January, but down 2.8 percent year-over-year.
The housing market is in desperate need of more supply as low inventory pushes up home prices. For-sale inventory dropped 31.6 percent in the fourth quarter to a record low of 753,102 units nationwide in December. For the full year, inventory dropped 26.6 percent in 2021, according to Zillow.
Moreover, homebuilder confidence is waning. The National Association of Home Builders/Wells Fargo Housing Market Index, which tracks builder’s confidence in single-family home sales, dropped for the third straight month in March, down two points from February and below 80 points for the first time since September. Supply constraints, rising construction costs and shifting federal policy are among the factors cited for builders’ dimming outlook.
“Builders are reporting growing concerns that increasing construction costs (up 20 percent over the last 12 months) and expected higher interest rates connected to tightening monetary policy will price prospective home buyers out of the market,” said National Association of Home Builders chief economist Robert Dietz in a report this week.
In the meantime, home prices continue to soar. The median home sale price hit $376,200 in February, nearing an all-time high, according to Redfin.