The number of new homes completed last month was up nearly 10% compared to a year earlier. But further up the housing pipeline, things are not looking so bright.
The number of new single-family housing starts — projects that began construction — dropped by 14% in March.
That metric can be volatile month to month. But at this time of year, “we would generally see an increase in starts in March,” said Selma Hepp, Chief Economist at Cotality. “Actually, this is very unusual to see.”
The weather is warmer, but customers just aren’t there, said Donny Wills, a general contractor in Austin, Texas.
“Homeowners are scared watching their 401Ks and things like that diminish, so they're less likely to spend cash on renovations and building new houses,” he said.
Many potential buyers are nervous that lumber and other materials will get more expensive over the course of their building project, he added, thanks to the president’s tariffs.
Wills added that he has not seen his costs go up — yet. But others surveyed by the National Association of Home Builders have.
“Builders in our surveys have reported that they're building material suppliers have typically raised prices such that it increases their construction costs per single family home by about $11,000,” said Robert Deitz, NAHB’s chief economist.
Builders reported seeing fewer inquiries from prospective buyers and less traffic to their model homes and websites, he said. “And I think that's a reflection that the consumers have kind of taken this wait-and-see approach.”
This approach comes at a tricky time in certain markets, though. The Sun Belt has seen lots of new home building in recent years.
“What you know you're kind of seeing now is that demand has probably fallen short of the supply that builders have brought to market over the past year,” said Charlie Dougherty, a senior economist at Wells Fargo.
That means more builders in those regions may cut prices. So if you’re a prospective buyer who can afford it, “I think this is a potentially good opportunity to get into the new home market,” Dougherty said.
It’s not exactly the kind of environment that’ll encourage developers in those areas to build even more new homes, though.
Donny Wills in Austin, Texas is doing a lot more home renovation projects this year — a cheaper option for his customers and a way to keep bringing in some revenue.
“Yeah, it keeps the employees busy. It keeps the subcontractors busy,” he said. “You know, it may not be where they're hiring 10, 15, 20 more guys to do the project, but at least it keeps those companies up and alive.”
And hopefully hanging on until new home construction picks up again.
