WASHINGTON (Reuters) – U.S. homebuilding fell by the most in 36 years in March amid a broad decline in activity, offering further evidence that the economy was buckling under the weight of drastic measures to control the spread of the novel coronavirus.
Housing starts plunged 22.3% to a seasonally adjusted annual rate of 1.216 million units last month, the Commerce Department said on Thursday. That was the largest monthly decline in starts since March 1984. Data for February was revised down to show homebuilding decreasing to a pace of 1.564 million units instead of dropping to 1.599 million units as previously reported.
Homebuilding declined in all four regions last month.
Economists polled by Reuters had forecast housing starts falling to a pace of 1.300 million units in March.
Housing starts rose 1.4% on a year-on-year basis in March.
The Commerce Department’s Census Bureau, which compiles the housing starts data said though “many governments and businesses are operating on a limited capacity or have ceased operations completely,” it “has monitored response and data quality and determined estimates in this release meet publication standards.”
Permits for future home construction dropped 6.8% to a rate of 1.353 million units in March.
The housing market was back on the recovery path, thanks to low mortgage rates, before states and local governments issued “stay-at-home” or “shelter-in-place” orders affecting more than 90% of Americans to curb the spread of COVID-19, the respiratory illness caused by the virus, and abruptly stopping economic activity in the country. It had hit a soft patch starting the first quarter of 2018 through the second quarter of 2019.
The report followed in the wake of dismal data on Wednesday showing a record fall in retail sales in March and the biggest drop in factory output since 1946. Economists are predicting the economy, which they believe is already in recession, contracted in the first quarter at its sharpest pace since World War II.
While the economy’s troubles have pushed mortgage rates to near historic lows, economists say this would probably not be enough to support the housing market amid a surge in unemployment.
A survey on Wednesday showed confidence among single-family homebuilders dropped a record 42 points in April to 30, the lowest reading since June 2012. It is also the first time that builder confidence was below a reading of 50 since June 2014.
Single-family homebuilding, which accounts for the largest share of the housing market, tumbled 17.5% to a rate of 856,000 units in March. Single-family housing building permits dropped 12.0% to a rate of 884,000 units in March.
In the volatile multi-family housing segment, starts declined 31.7% to a rate of 360,000 units last month. Permits for multi-family units increased 4.9% to 469,000.
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