By Nathalie Voit
Construction of new residential housing was unexpectedly up in March, the Commerce Department said in a news release on April 19.
Privately-owned housing starts in March rose 0.3% to a seasonally adjusted annual rate of 1.793 million. This was the highest figure since June 2006 and surpassed market estimates of 1.745 million, as forecasted by Reuters economists.
Data for February was also upwardly revised to an annualized rate of 1.788 million units from 1.769 million units, the department said.
Regarding single-family housing, U.S. homebuilding activity tumbled 1.7% to a pace of 1.200 million units a year in March. Starts of houses with five or more units surged 7.5% to 574,000 units, the department said.
Building permits for future housing increased 0.4% last month to a rate of 1.873 million units, according to the report.
However, mortgage rates continue to trend upward. As of April 21, the 30-year fixed mortgage rate is 5.27%, according to data from Mortgage News Daily. In the week ending April 21, mortgage rates averaged 5.11%, up from 4.72% in the week ending April 7, Freddie Mac said.
The mortgage loan giant said that rates have now increased for the seventh consecutive week as 10-year Treasury yields continue to rise.
According to Goldman Sachs economist Ronnie Walker, housing starts in 2022 will surge by 5% to 1.7 million despite the decade-high mortgage rates because “housing starts have historically been unresponsive to changes in mortgage rates in a supply-constrained environment.”
“When housing markets are tight, like they are today, homebuilders are likely to keep building because they should have little fear that homes will sit vacant after completion,” Walker said in a research note titled: “Will Higher Rates Put Out The Housing Fire?”
Walker added that the housing market is “the most interest-rate-sensitive segment of the economy” and the Fed’s primary mechanism of monetary policy transmission.