Boom in Housing Sector more than expected amid rise in supply prices

Amid the lack of suppliants and soaring lumber price which has capped a limit on builder’s capacity of production, they saw a new hope when the U.S. homebuilding surged to a nearly 15-year high in March.

It is expected that with increasing vaccinations, warmer weather and massive fiscal stimulus, this year’s growth will be strongest in nearly four decades. The rebound in the homebuilding was reported by the Commerce Department on Friday as the retail sales rose in March, hinting at a recovery stage for the economy.

But it is not only things that are on a rise, as reported on Friday data suggests that consumer sentiment increased moderately in the month of April. This comes as the pandemic is unpredictable and the inflation is showing signs of heating up.

Corporate economist at Navy Federal Credit Union in Vienna, Virginia said that “We’re in a unique situation with the economy beginning to rebound from the worst of the pandemic.”

Housing surged by 19.4% which keeps it at 1.739 million units last month, highest since June 2006. Homebuilding had seen a downward slope in the month of February which was mostly due to the unpredicted cold weather and the winter storm in Texas and other parts of the South.

Permits for future homes rose by 2.7% but it’s not really an increase as the same had plunged by 8.8% in February. Northeast, South and Midwest witnessed an increase in groundbreaking activity but West witnessed the opposite. However, compared to March 2020, permits for future homes jumped 30.2%.

“While housing demand is expected to remain strong, we expect it to diminish somewhat as the year progresses… Homebuilders continue to face supply constraints, including increasing prices of lumbers and other materials,” says Doug Duncan, chief economist at Fannie Mae in Washington.

The housing industry has been dealing with constraints such as the supply is insufficient. Millions of American are working from home and remote schooling as the pandemic entered its second year, thus creating demand in the housing sector.

A Michigan University’s report showed that the consumer sentiment index rose from 84.9 to 86.5 in March. Economist has forecasted for the index to be up at 89.6.

This month, the reports showed that both the consumer and producers’ prices have increased as domestic demand pushed against supply constraints.

Single-family homebuilding considered the largest share of the housing sector surged 15.3% to a rate of 1.238 million and permit of those surged 4.6% to a rate of 1.199 million units.

Housing completions increased 16.6% to a rate of 1.580 million units in March. According to realtors, the single-family housing starts and completion rate should be between 1.5 million to 1.6 million units per month.