In March, housing starts in the US fell close to it’s lowest level in two years resulting from persistent weakness in the single-family housing segment. The housing market continues to struggle even though mortgage rates have been falling.

US Housing starts dropped 0.3% from the previous month to a seasonally adjusted annual rate of 1,139,000 units in March, the lowest level since May 2017, well below market expectations of 6.5% growth.

March saw the single-family housing segment which accounts for the largest share of the market fall 0.4% to 785,000 units, the lowest level since September 2016. Homebuilding starts for the multi-family segment remained steady at 354,000 units.

The largest declines in housing starts were recorded in the Midwest down 17.6% to 131,000 followed by the South slipping 7.2% to 604,000 and the Northeast dropping 4.4% to 86,000. The west saw increases of 31.4% to 318,000. The sharp decline in the Midwest is most likely due to devasting flooding in the region since mid-March.

Permits for new home construction fell 1.7% to a seasonally adjusted annual rate of 1,269,000 in March, off the market expectation by 0.3%, and the lowest since last October. Single-family homebuilding permits slipped 1.1% to 808,000 while permits for the multi-family segment slipped 2.7% to 461,000. Except for the west which saw gains of 10% to 318,000, permits were lower in all regions combined by 17.8% to 951,000.

The discouraging report contrasts starkly with recent positive data coming out of retail sales, trade, corporate earnings, among others, all indicating that the economy was rebounding late in the first quarter following a slow start to the year.

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