By JOSH BOAK AP Economics Writer
WASHINGTON (AP) — U.S. home construction slipped by 0.3% in March, as housing starts ran below last year’s pace in a sign that inventory could be an obstacle for would-be buyers.
The Commerce Department said on Friday that ground breakings last month occurred at a seasonally adjusted annual rate of 1.14 million. So far this year, starts have fallen by 9.7%.
Builders are pulling back from the construction of single-family houses and apartments, even though the country’s solid job market has stoked demand from buyers seeking better accommodations. Nor does the supply squeeze seem likely to end soon, as the number of permits issued, an indicator of future activity, fell 1.7% to an annual rate of 1.27 million.
Homebuyers have benefited from average 30-year mortgage rates that have drifted down to 4.17% after peaking at nearly 5% in November. But years of price increases eclipsing income growth have left many buyers unable to afford a house, possibly suppressing construction activity.
“Higher home prices have eaten into some of the increased purchasing power driven by lower mortgage rates and higher incomes,” said Danielle Hale, chief economist at realtor.com.
“As a result, while some indicators show that buyers have more momentum than initially expected this year, affordability is still very top of mind and could help explain slower housing starts.”
Housing starts fell last month in the Northeast, Midwest and South, but they surged in the West. Construction data can be volatile, and the regional pace of homebuilding can change sharply from month to month.
Economists noted that severe weather in the Midwest might have stifled housing starts, but that the underlying difficulty for construction might be a lack of workers.
“Homebuilders still face challenges such as labor shortages and high labor costs,” said Joel Kan of the Mortgage Bankers Association. “These headwinds continue to slow the pace of construction, and on a year-over-year basis, single-family starts have fallen in five of the last six months.”