Homebuilders' stocks tumble as housing starts fall 14.7%: Economist says 'bad time to buy a home'

Under the influence of the negative economic data, the Government has been able to make a profit.SPDR Homebuilders ETF(NYSE:XHB) fell 1.8% to its lowest level since February 26, 2024 in mid-rock on Tuesday.

Since the start of the month, the index has fallen about 101 TP3T, the first market correction since September 2023, after having risen a whopping 601 TP3T in the six months prior to that until the end of March.

The worst performers in the U.S. residential construction category on Tuesday wereInstalled Building Products, Inc.(NYSE: IBP),TopBuildInc. (NYSE: BLD), Dream Finders Homes, Inc.(NYSE: DFH)

Sharp Drop in Housing Starts Signals Cooling Market

In the U.S., housing starts in March 2024 were down a whopping 14.71 TP3T from the previous year to an annualized rate of 1.321 million units.

According to the U.S. Census Bureau, this figure is not only the largest drop since April 2020, but also significantly lower than the expected 1.48 million.

Of these, single-family homes decreased by 12.41 TP3T to 1,022,000 units, and units in buildings with five or more units decreased by 20.81 TP3T to 290,000 units.

Area Distribution

• NortheastReduce 36% to 80,000 sets

• midwest: Reduce 23% to 157,000 sets

• southern partReduced by 17.81 TP3T to 736,000 people

• western partIncreased by 7.1% to 348,000 units

Building permits have also declined

March 2024 building permits decreased by 4.31 TP3T for a seasonally adjusted annual growth rate of 1.458 million, reversing the February trend of 2.31 TP3T growth and falling short of the expected 1.514 million.

This is the lowest level since July of last year. Applications for single-family homes also fell 5.7% to 973,000 units, a five-month low.

Local Observations::

• southern part: down slightly by 0.6% to 771,000 households

• midwest: Significantly reduced by 14.7% to 197,000 households

• NortheastSignificantly decreased by 20.81 TP3T to 160,000

• western part: 5.1% growth to 330,000 people

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Analyst Insight: Slowing Growth and Future Concerns

LPL Financial Mat EconomistJeffrey Roach) emphasized that housing starts fell in March and that "the pace of growth is starting to crack."

The economist expects a marked slowdown in economic growth, especially in multifamily housing construction. He warns that the decline in building permits indicates a slowdown in construction activity in the future.

"Housing construction is poised to slow as potential homebuyers say now is not a good time to buy a home. Investors should expect residential investment to be a drag on the growth of gross domestic product in the coming quarters," Roach wrote.

Comerica Bank Mat EconomistBill Adams) noted the impact of high interest rates, particularly on credit-intensive multifamily housing. While construction starts and permits were up year-over-year in the first quarter, the industry showed clear signs of cooling as borrowing costs rose.

"Throughout the first quarter, housing starts increased 2.11 TP3T year-over-year, but declined at an annualized rate of 17.51 TP3T compared to the fourth quarter of 2023," he said. "Building permits in the first quarter increased 4.61 TP3T year-over-year, and 1.11 TP3T sequentially on an annualized basis.

The multifamily segment of residential construction is experiencing the most significant slowdown. Typically, these developments are leased and rely on long-term debt financing.

However, with the Fed raising interest rates, the cost of such financing has risen sharply.

In total, the housing market faces continued pressure from rising mortgage rates and economic uncertainty, while the recent downturn in the residential construction sector may signal a broader cooling.

Experts predict that residential investment will be a drag on the growth of gross domestic product, and that the market may not stabilize until the Federal Reserve adjusts its monetary policy.

Homebuilders and investors should brace themselves for a challenging few quarters ahead, as potential homebuyers increasingly recognize that now is not the time to buy.

Chart: Housing Starts and Building Permits (month-over-month %)

Read nowUnless the Middle East gets promoted, the IMF will lower interest rates: inflation will rise and output will fall.

Images generated using artificial intelligence via Midjourney.

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Article Home Builders' Stocks Plunge, Housing Starts Drop 14.71 TP3T: Economist Says 'Bad Time to Buy a Home' was originally published on benzinga.com

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