March 18, 2014, 11:34 AM ET
Vital Signs: Signs of Slowing in Housing
By Kathleen Madigan
The latest data show some cracks in housing’s foundation.
First the National Association of Home Builders said its members feel less upbeat about the future. The housing market index increased to 47 in March but that was after the index plunged 10 points to 46 in February. A reading below 50 means more builders view conditions as poor rather than good. Builders’ expectations about future sales dropped to the lowest reading since last May.
Then came Tuesday’s news that fewer homes are being started in early 2014 than at the end of 2013. Total housing starts in January and February are about 10% below their fourth-quarter average. The large single-family component is running about 12% less.
To be sure, the extreme harsh weather was responsible for some of the drop in starts. But even regions that did not experience extreme weather have seen builders breaking ground on fewer projects. That suggests other factors are at play. Rising mortgage rates have hurt affordability. The NAHB points to a shortage of buildable lots and skilled workers, plus rising materials prices as detriments.
As long as mortgage rates do not spike in coming months, demand for new homes should hold up. But home construction is unlikely to post the big gains seen in 2012 and 2013.
First the National Association of Home Builders said its members feel less upbeat about the future. The housing market index increased to 47 in March but that was after the index plunged 10 points to 46 in February. A reading below 50 means more builders view conditions as poor rather than good. Builders’ expectations about future sales dropped to the lowest reading since last May.
Then came Tuesday’s news that fewer homes are being started in early 2014 than at the end of 2013. Total housing starts in January and February are about 10% below their fourth-quarter average. The large single-family component is running about 12% less.
To be sure, the extreme harsh weather was responsible for some of the drop in starts. But even regions that did not experience extreme weather have seen builders breaking ground on fewer projects. That suggests other factors are at play. Rising mortgage rates have hurt affordability. The NAHB points to a shortage of buildable lots and skilled workers, plus rising materials prices as detriments.
As long as mortgage rates do not spike in coming months, demand for new homes should hold up. But home construction is unlikely to post the big gains seen in 2012 and 2013.
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