Residential construction continued its ragged attempts to keep up with demand. Permits for construction, which were down in February, posted a healthy increase in March while housing starts did the exact opposite.
Residential permits rose 3.6% to a seasonally adjusted annual rate of 1.26 million units, while housing starts dropped by 6.8% to 1.22 million. Despite that each measure has alternated gains and losses for months, the overall trend has been positive. Permits are running 17% higher than last year, and starts are up by 6.2%. Housing completions are also improving, rising almost 10% year-over-year to 1.09 million units. However, more than half of these, 621,000, are multi-family units.
In its housing forecast this week, Freddie Mac notes that its current projection is for 1.36 million housing starts this year, just slightly ahead of the actual March number. However, just keeping pace with growing demand and replacing existing housing stock will require 1.7 million new units.
Fannie Mae’s forecast echoed Freddie’s in predicting that the low level of available homes for sale, existing as well as newly built, will be a headwind for an otherwise promising spring market. Fannie also said the Fed’s favorite inflation indicator, the personal consumption expenditures (PCE) deflator, has now outpaced the Fed’s target of a 2.0% annual increase. This prompted Fannie’s economists to revise their earlier predictions about the Fed’s rate timeline. Instead of hikes in September and December, the company looks for the Open Market Committee to move in June and September.
Homes That Appreciate Faster
The National Association of Realtors (NAR) wondered why some homes appreciate more than the typical population- and inflation-driven 3% to 4% a year. After analyzing five years-worth of listings they found: Homes with an open floor appreciated the fastest, 7.4%, along with smaller homes (under 1,200 square feet) which had gains of almost twice that of homes over 2,400 square feet (3.6%). Prices of homes with two bedrooms rose more than a third faster than those with five or more.
Other features that brought more (eventual) bang for the buck were homes with fireplaces, patios, open floor plans, views of green space views, or a modern architectural style. Food for thought as you shop for a home this spring.
And note that mortgage rates just dove under 4%. Call or email for more information.