Home builders are eagerly awaiting the spring and summer months, expecting a surge in construction activities. However, the industry may experience some delays before construction reaches its peak.
Housing Starts and Permits Data Overview
The January data for housing starts and permits, which are government measures of the initial stages of home building, is scheduled for release on Friday at 8:30 a.m. ET. Economists predict that housing starts, which indicate the commencement of construction on new units, will remain unchanged from the previous month. It is anticipated to maintain a seasonally adjusted annual rate of 1.46 million, according to FactSet.
New Home Sales Performance in 2023
Despite a rise in mortgage rates that resulted in reduced sales of pre-owned homes and reaching a nearly 30-year low, new home sales experienced a growth of 4.2% in 2023 compared to the previous year. However, the early stages of new construction showed a decline, with single-family housing starts dropping by 6% from the previous year.
Positive Outlook for Single-Family Housing Starts
The National Association of Home Builders announced on Thursday that it expects single-family starts to grow by approximately 5% this year. In February, the association’s monthly index measuring industry sentiment recorded its highest level since August. Builders expressed confidence in selling conditions later in the year, with an index component tracking their expectations for the next six months reaching its highest reading since June.
Impact of Mortgage Rates on Housing Costs
Mortgage rates, a key factor influencing housing costs, have been rising due to stronger-than-expected economic data released earlier this week. The average 30-year fixed mortgage rate for this week reached 6.77%, the highest since mid-December.
Additionally, the year-to-date increase in the 10-year Treasury yield, used as a benchmark for mortgage rates, along with concerns within the industry about labor and lot availability, serve as a reminder that the housing market recovery may face obstacles. Buyers remain sensitive to changes in interest rates and construction costs, as stated by Robert Dietz, the chief economist of the trade group.