New Home Builds Boosted by March Multi-Unit Surge

New home construction was boosted in March by an unexpected surge in multi-family residential construction, a volatile field that could spur additional construction growth if the increase is sustained. Construction of homes with at least five units rose about 27 percent in March from a month prior, to the highest level since January 2006.

New-home construction in March reached highest level since before the financial crisis, driven by a big gain in the volatile multifamily-home niche.

Despite a 4.8 percent month-to-month decline in single-family home construction, housing starts rose 7 percent in March to a seasonally adjusted annual rate of 1.04 million, the Commerce Department said Tuesday. The figures were the strongest since June 2008.

Economists surveyed by Dow Jones Newswires had forecast housing starts rising 1.7 percent, to a rate of 933,000. February's figures were revised sharply upward to a rate of 968,000. Meanwhile, the number of new building permits, an indication of future construction, fell 3.9 percent to an annualized rate of 902,000 in March.

In spite of the (mostly) good news, homebuilders remain wary of the strength of the market, and difficulties in getting construction loans and higher costs for building materials could slow construction in the coming months. The National Association of Home Builders said its member confidence index fell for the third straight month in April, and was at its lowest level since October, according to an April 15 report. April's index score dropped two points to 42, on a scale where readings below 50 indicate a generally negative view of the market.

The government data showed new home building rose in three out of our U.S. regions last month. Construction rose 10.9 percent in the South, 9.6 percent in the Midwest and 2.7 percent in the West, but fell 5.8 percent in the Northeast.

Actual housing starts, which are calculated without seasonal adjustments, increased to 85,800 in March from an upwardly revised 66,300 for the prior month. Investments in residential projects and home improvements have contributed to overall economic growth for seven consecutive quarters.