In today’s construction news, read about the gold market continues to gather traction, with prices trading near session highs and breaking fresh records above $3,000 per ounce. Meanwhile, U.S. single-family homebuilding rebounded sharply in February amid a thaw in winter weather while production at factories surged, but rising prices for raw materials because of tariffs threaten the nascent housing market and manufacturing recovery. Finally, the rate of new building increased unexpectedly in February, probably reflecting a comeback from severe weather in January, according to the Census Bureau on Tuesday.
US Homebuilding Won’t Stop Gold’s Rise Above $3,000
Original Source: Increase in US home construction can’t dampen gold’s rally above $3,000
Gold prices hit record highs above $3,000 an ounce as the market gains pace. Despite evidence of US housing sector recovery, recession fears have lessened and gold’s appeal as a safe-haven asset may have declined.
The Commerce Department reported on Tuesday that housing starts rose 11% to 1.50 million units last month from 1.35 million in January. Although economists predicted a tiny increase to 1.38 million units, the figure exceeded expectations.
According to the study, yearly house building fell 2.9% from February 2024.
Strong U.S. economic data has had no impact on gold prices, as technical momentum drives prices upward. Gold was $3,028.20 an ounce, up over 1%.
In February, single-family home construction surged 11.4% to 1,108,000 units.
The U.S. housing industry increased last month, but permits for new building were mostly unchanged, so economists are unsure if this momentum will continue.
The report showed that future home construction building permits declined 1.2% to 1.46 million from January’s revised 1.47 million. Though experts predicted a drop to 1.45 million permits, the report was better than expected.
As the U.S. economy weakens, anxiety about former President Donald Trump’s tariffs on imports and the trade war have focused attention on the housing industry.
Some market analysts believe the U.S. housing sector might prevent a recession. Some economists say trade war-related lumber prices could hurt housing development this year.
Housing building declined in 2024 as rising mortgage rates and property prices drove more people out of the market.
US Industry and Home Construction Are Booming, but Tariffs Cloud the Rebound
Original Source: US homebuilding, manufacturing surge; tariffs cast pall over recovery
A thaw in winter weather boosted U.S. single-family homebuilding and factory production in February, but tariffs on raw materials imperil the housing market and manufacturing revival.
Tuesday’s reports did not alter the perception that the economy slowed in Q1 due to President Donald Trump’s inconsistent tariffs and government cuts, which negatively impacted business and consumer sentiment.
“None of the economic reports today are tariff-free,” said FWDBONDS chief economist Christopher Rupkey. “The economy is swiftly losing momentum here and if Washington does not change course on many of its business-unfriendly proposals and initiatives, the odds of an economic recession could shift from a risk to a reality in a hurry.”
Single-family housing starts, which make up most homebuilding, rose 11.4% to 1.108 million units last month, according to the Census Bureau. Homebuilding increased in the Northeast and densely populated South as cold weather abated. West housing starts climbed, but Midwest starts fell, mainly due to winter storms.
February starts declined 2.3% year-over-year. This month, Trump announced and later postponed a 25% tax on most Canadian and Mexican goods, which would have raised Canadian timber levies to about 40%. Chinese goods were subject to 20% tariffs, while steel and aluminum levies began this month.
On Monday, the NAHB assessed “a typical cost effect from recent tariff actions at $9,200 per home.” Homebuilder sentiment fell to a seven-month low in March.
As the Trump administration pushes down on illegal immigration, construction workers have not shown up for work for fear of deportation.
In 2021, the Center for American Progress estimated 23% of construction labor is undocumented.
The average rate on the popular 30-year fixed-rate mortgage has dropped from 7% at the start of the year, but economic uncertainties may keep buyers away. With new housing inventory at December 2007 levels, builders may not want to build single-family homes.
February single-family housing permits declined 0.2% to 992,000 units.
Wall St. stocks fell. US dollar rose against basket of currencies. Longer-term Treasuries yielded more.
Eyes on feed
On Tuesday and Wednesday, Federal Reserve officials are expected to leave the benchmark overnight interest rate in the 4.25%-4.50% range, having reduced it by 100 basis points since September, and assess the economic impact of the Trump administration’s inflationary policies.
The Labor Department’s Bureau of Labor Statistics said that import prices rose 0.4% in February, mirroring January’s gain and defying economists’ predictions for a 0.1% fall. Higher consumer goods prices raised tariff-free import prices.
U.S. Chinese import prices rose 0.5%, the highest increase since March 2022, after rising 0.2% in January. They gained 0.5% on a year-over-year basis, the highest advance since December 2022.
Though February consumer and producer price readings were better than expected, the specifics of the Personal Consumption Expenditures (PCE) price indexes, which the Fed tracks for its 2% inflation objective, were firmer.
Goldman Sachs now estimates the PCE Price Index excluding food and energy increased 0.34% in February, upgraded from 0.29% before the release of the import prices data. Core PCE inflation climbed 0.3% in January. It was forecast to increase 2.75% on a year-over-year basis after advancing 2.6% in January.
“Import prices are measured before the imposition of any tariffs and if import prices do not fall sharply in the coming months, it will be clear evidence that the tariffs are being paid by U.S. households and companies,” said Conrad DeQuadros, senior economic advisor at Brean Capital.
“Import prices from China are rising up even if the series in this report excludes tariffs. Chinese manufacturers do not appear to be decreasing their prices to absorb the 10% levy,” he said.
Financial markets expect the Fed to resume decreasing rates in June, after it paused its easing program in January. The policy rate was increased by 5.25 percentage points in 2022 and 2023.
Q1 growth expectations are below 1.5% annualized. The October-December economy expanded 2.3%.
Housing projects with five or more units started 12.1% more, or 370,000 units.
To more than reverse January’s loss, housing starts rose 11.2% to 1.501 million units. Housing starts were expected to reach 1.380 million units by Reuters economists.
Multifamily development permits declined 4.3% to 404,000 units. That reduced building permits by 1.2% to 1.456 million last month.
A separate Fed report showed manufacturing output rose 0.9% in February due to increased auto production. This followed a 0.1% rise in January and beat economists’ 0.3% forecast. Factory output may have increased due to businesses rushing orders before import duties, economists said.
“The threat of tariffs and the on-again, off-again implementation style is likely more damaging for manufacturers trying to operate in this environment,” Wells Fargo economist Shannon Grein said. “Trying to navigate supply snarls and cost pressures is hard in normal times, adding the uncertainty of tariffs only exacerbates that challenge.”
Unexpected Rise in New Home Construction in February
Original Source: New Home Construction Showed Surprise Bump in February
February saw a surprising increase in new construction, possibly a rebound from January’s bad weather, the Census Bureau reported Tuesday.
From a downwardly revised 1.35 million in January, housing starts rose 11.2% to 1.5 million. Permits for new housing were at an annual rate of 1.46 million, down 1.2% from the prior month’s upwardly revised 1.47 million. Both starts and permits exceeded expectations.
Still, starts and permits are behind last year’s rate. High mortgage rates and home prices have hurt housing sales. But now there is a fresh concern that import taxes suggested by President Donald Trump could hike building costs.
“New housing starts were down 2.9% year-over-year, while new permits for new housing construction fell 6.8% nationally,” said Bright MLS chief economist Lisa Sturtevant. “Building activity was down significantly in the Midwest where new housing starts were 24.9% lower compared to a year ago. Although weather may have hindered completions, growing concerns over tariffs are starting to have an impact on new starts and permitting activity.”
The National Association of Home Builders said that confidence among its members fell by three points in March to the lowest level in seven months. The trade group warned that taxes on steel and aluminum, as well as other commodities, could add $9,200 to the price of an average new home.
The report comes as the Federal Reserve begins a two-day meeting to discuss interest rates and update its economic forecasts. Despite uncertainty over Trump’s tariffs and other economic policies, analysts expect the Fed to hold rates. The central bank will also likely lower its forecast for economic growth and raise its estimate of future unemployment levels.
Van Hesser, KBRA’s chief strategist, said that with inflation still above the Fed’s 2% annual target, rising expectations, and federal policy leanings threatening to push prices higher, a hawkish tilt was likely after this week’s meeting.
That will keep borrowing costs for consumers high, although yields on government bonds have dipped from earlier in the year. Average 30-year fixed mortgage rates are 6.50%.
Summary of today’s construction news
In summary, some experts say that the trade war’s effect on higher lumber prices could make it harder to build homes this year. Throughout 2024, building homes slowed down because higher borrowing rates and home prices kept more people from buying homes.
Meanwhile, multiple-family building permits dropped 4.3% to a rate of 404,000 units last month, which helped to reduce overall building permits by 1.2% to a pace of 1.456 million units. Overall housing starts increased 11.2% to a rate of 1.501 million units, more than reversing the January decline. Economists surveyed by Reuters had predicted housing starts would rise to a rate of 1.380 million units.
Finally, according to Van Hesser, chief strategist at KBRA, “we would be on the lookout for a hawkish tilt coming out of this week’s meeting,” as inflation is still significantly higher than the Fed’s 2% annual target and future price expectations are rising “and federal policy leanings threatening to push prices higher.” Despite the fact that government bond yields have decreased from earlier in the year, this will maintain high borrowing costs for consumers. 30-year fixed mortgage rates are currently averaging 6.50%.
