In today’s construction news, read about how, while a severe lack of previously owned homes for sale continues to support new construction, a comeback in mortgage rates is discouraging would-be purchasers, leading to a precipitous drop in single-family homebuilding in the United States. On the other hand, based on statistics from March 2024 collected by CoStar, the number of hotel rooms under construction in the United States increased year over year for the first time since June 2023. When it comes to property market statistics, data, and online marketplaces, CoStar is unrivaled.
US homebuilding Industry Showing Signs of Improvement
Original Source: US homebuilding retreats; manufacturing turning the corner
In March, U.S. single-family homebuilding fell, and while new construction is supported by a severe lack of previously owned homes, rising mortgage rates are deterring purchasers.
The Commerce Department reported Tuesday that single-family housing construction permits fell to a five-month low. Residential investment rebounded in the second half of 2023 after nine straight quarters of decline, the longest stretch since the 2006 housing market crash. Recovery appears to be fading.
“The housing recovery has stalled for now as home builder expectations of sharply lower interest rates this year have faded,” said FWDBONDS chief economist Christopher Rupkey. “One thing is for certain, and that is home prices are going to be on an upward, more unaffordable trend without more supply.”
Single-family housing starts, which make up most homebuilding, fell 12.4% to 1.022 million units last month, according to the Census Bureau. Single-family starts rebounded to 1.167 million units in February, up from 1.129 million.
March single-family home building rose 21.2% year-over-year.
Wet weather may have slowed groundbreaking last month. Homebuilding declined in the Northeast, Midwest, and heavily populated South but surged in the West.
In the fourth quarter, the government reported 757,000 dwelling units for sale, down from 1.145 million before the COVID-19 epidemic.
The National Association of Home Builders (NAHB) said Monday that single-family home builders’ confidence remained at an eight-month high in April. NAHB claimed “buyers are hesitating until they can better gauge where interest rates are headed.”
Strong labor market and inflation reports suggested the Federal Reserve may delay a rate cut this year, raising the average 30-year fixed-rate mortgage rate to 7%, according to Freddie Mac. Several economists doubt the U.S. central bank will decrease borrowing costs in 2024.
On Tuesday, Fed Chair Jerome Powell indicated the central bank may need to hold rates higher longer than expected due to strong inflation.
The Fed has held its rate at 5.25%–5.50% since July. The benchmark overnight rate has risen 525 basis points since March 2022.
Powell’s comments lowered Wall Street stocks. US dollar rose against basket of currencies. U.S. Treasury yields climbed.
Housing completions fall
Housing project starts with five or more units fell 20.8% to 290,000, the lowest level since April 2020. Overall housing starts fell 14.7% to 1.321 million units in March, the highest dip since April 2020.
Reuters economists predicted 1.487 million starts.
In March, single-family house construction permits decreased 5.7% to 973,000 units, the lowest level since October. This may be due to rising mortgage rates and decreased homebuilding.
Multi-family building permits remained at 433,000 units. The overall building permit rate fell 4.3% to 1.458 million units, the lowest since July.
Housing should have contributed slightly to first-quarter GDP growth, economists say. Inflation data affects the home market.
Houses sanctioned for construction but not started rose 0.7% to 273,000 in March. The single-family homebuilding backlog remained at 141,000.
That housing segment’s completion rate fell 10.5% to 947,000 units, implying inadequate supply and high costs.
Overall housing completions fell 13.5% to 1.469 million units. Realtors predict that 1.5 million to 1.6 million house starts and completions per month are needed to close the inventory gap.
After the epidemic, multi-family starts and permits increased, causing a record building backlog.
“With a typical 1.5-2-year time from start to completion, most of these units are being completed,” said Visa economist Alice Zheng. “We should see less incoming multi-family supply, which could put pressure on housing prices.”
Manufacturing appears to be improving but housing fell last month. The Fed’s stricter monetary policies hit these two areas hardest.
A separate Fed report on Tuesday showed factory production rose 0.5% in March after rising 1.2% in February. Factory output fell 0.1% in the first quarter after falling 0.9% in October-December.
“Manufactured output exits the first quarter at a high level relative to the quarterly average, which potentially sets the stage for a solid advance in output in the second quarter,” said Brean Capital chief economic advisor John Ryding.
U.S. Hotel Construction Climbed in March for the First Time in Nine Months
Original Source: U.S. hotel construction activity rose in March, first increase in nine months
CoStar’s March 2024 data showed the first year-over-year increase in U.S. hotel room construction since June 2023. CoStar is a leading online real estate marketplace, information, and analytics supplier.
U.S. Hotel Pipeline: March 2024 (% change from March 2023)
In construction: 156,525 rooms (+1.5%)
Final Plan: 263,316 rooms (+9.8%).
Planning: 324,522 rooms (+39.5%).
While the number of rooms under construction has increased, it remains below pre-pandemic levels. From October 2023, month-over-month percentage changes have improved, and the final phase of the pipeline contains 156,000 rooms, the most since November 2018. These rises indicate a rebalancing of the market and the likelihood that developers are staying with current interest rates.
Isaac Collazo, STR analytics VP
Upper midscale and upmarket buildings make up over half of the in-construction room total.
Chain-scale segments (supply %, in-construction rooms)
Luxury (4.3%, 6,466 rooms)
Upper Upscale (19,766 rooms, 2.8%)
upscale (4.0%, 35,912 rooms)
Upper Midscale (3.6%, 42,605 rooms)
Medium (2.9%, 14,733 rooms)
Economy (1.2%, 7,946 rooms)
CoStar Group info
CoStar Group (NASDAQ: CSGP) is a prominent online real estate marketplace, information, and analytics provider. In 1987, CoStar Group began extensive research to create and manage the largest real estate database. CoStar, the global leader in commercial real estate information, analytics, and news, helps clients evaluate, interpret, and obtain unrivaled insight into property values, market situations, and availabilities. Apartments.com is the top online marketplace for tenants looking for fantastic apartments, helping property managers and owners market their properties. Over twelve million monthly global unique visits make LoopNet the largest visited online commercial real estate platform. Premium data benchmarking, analytics, and marketplace insights for the worldwide hospitality business from STR. Ten-X is a prominent commercial real estate online auction and negotiated bid platform. Homes.com is the fastest-growing online residential marketplace for agents, buyers, and sellers. OnTheMarket is a renowned UK residential property portal. BureauxLocaux is one of France’s leading commercial real estate platforms. Business Immo is France’s top commercial real estate news service. Thomas Daily is Germany’s largest real estate data database online. Belbex is Spain’s top commercial space rental and sales company. Over 100 million people visit CoStar Group websites monthly. Washington, DC-based CoStar Group has offices in the U.S., Europe, Canada, and Asia. Our corporate website, CoStarGroup.com, will distribute firm information periodically. For details, visit CoStarGroup.com.
CoStar’s future expectations and beliefs are among the “forward-looking statements” in this news release. These statements reflect current assumptions and are subject to several risks and uncertainties that might cause actual outcomes to differ considerably. The likelihood that U.S. hotel development growth estimates are wrong may add to such discrepancies. More information about potential factors that could cause results to differ materially from those anticipated in the forward-looking statements is available in CoStar’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2022 and Forms 10-Q for the quarterly periods ended March 31, 2023, June 30, 2023, and September 30, 2023. All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no duty to update or alter them due to new information, future events, or otherwise.
About STR: STR provides premier data benchmarking, analytics, and market insights for the worldwide hospitality industry. STR, founded in 1985, has headquarters in Hendersonville, Tennessee, London, and Singapore, and operates in 15 countries. CoStar Group, Inc. (NASDAQ: CSGP), a prominent commercial real estate information, analytics, and online marketplace provider, bought STR in October 2019.
Summary of today’s construction news
In summary, the number of permits issued for the future building of single-family houses dropped 5.7% in March to 973,000 units—the lowest since October of last year. That implies a slowdown in future homebuilding activity and probably reflects the recent increase in mortgage rates.
On the other hand, over half of the rooms in development are in upper midscale and upmarket buildings, which continue to dominate the pipeline.
