US Housing Starts in March

US housing starts in March rose 47% from the prior year, topping 1 million for the first time since 2008. The gains were driven by strength in apartment construction, which offset a decline in single-family units. Apartment construction rose 82% from a year ago and 27% from the prior month to 392,000. Although this category tends to be volatile, it illustrates that many would-be homebuyers are still being forced to rent due to tougher lending standards. Construction on single-family homes grew 29% year-over-year to 619,000, but fell 5% versus February, which was a tough comparable considering it was the strongest month on record since May 2008.

Building permits, which are a leading indicator of future construction and developments for the rest of the economy, rose 17% from the prior year to 902,000. However, permits fell 3.9% compared to February, and were below the 942,000 estimate, according to economists surveyed by Bloomberg. The drop does not appear to be driven by a collapse in demand. Rather, builders are having trouble responding to strong demand as they face higher construction costs and difficulty obtaining construction credit. In some cases, construction costs (labor and materials like lumber, paint, and plastics) are rising at a faster pace than appraised values, according to the National Association of Home Builders.