New Build Construction is Slowing Down. Here's Why That's Not Necessarily A Bad Thing.

New-home construction sees its largest monthly decline since March 1984, as COVID closures take a toll.

According to March’s economic report by MarketWatch, new-build housing starts and permits have fallen to their slowest pace since last July.

Builders started construction on new homes in the U.S. at a pace of 1.22 million in March, representing a 22% decrease from a revised 1.56 million in February. However, even with this decrease, the figures were still 1.4% higher than a year ago.

It’s the largest decline we’ve seen since March 1984.

Permitting activity, however, had a little less dramatic of a slowdown. Privately-owned housing unit permits were authorized at a seasonally-adjusted rate of 1.35 million. That was 6.8% below the revised pace of 1.45 million set in February, but still 5% above last year’s rate.

This news isn’t all doom and gloom, however.

Yes, housing starts are down and inventory is very low, but these conditions create some interesting market conditions. With the lockdown and the rise in unemployment, one would start to think we may have a housing crash on our hands (and it’s still possible if closures and stay-at-home orders continue much longer.)

For now, with mortgage rates so low (buyers still mainly purchase on payments they can afford) and inventory shrinking, it is keeping home prices high. There’s not enough inventory to meet buyer demand, and therefore, prices remain stable.

What this means for the future will all come down to how long our economy is closed.

New-home construction sees its largest monthly decline since March 1984, as COVID closures take a toll.

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