New residential construction dropped by more than expected in March, according to a monthly report from the Department of Commerce.
Housing starts fell by 6.8% to a seasonally adjusted annual rate of 1.215 million.
Economists had expected a slowdown partly because of Winter Storm Stella, which swept through the Northeast last month. Compared with March 2016, building in the Northeast fell by 15%, the most of any region.
Construction in February had been supported by warmer-than-usual weather, and so the cooldown in March was expected to affect homebuilding.
Single-family homebuilding, which has the largest share of the market, dropped by 6.2% to a pace of 821,000 units.
Building permits increased by 3.6% at a rate of 1.26 million, suggesting that construction may soon rebound. The National Association of Homebuilders’ monthly confidence index fell in April from a 12-year high in March, but it remained relatively strong. Builders continued to cite high regulatory costs and ongoing increases in the prices of building materials as challenges they face.
“The real gem of March’s report was building permits, which boomed 17% year-over-year,” Ralph McLaughlin, Trulia’s chief economist, said in a note. “Permits are important because they are the earliest signals of long-run new housing supply, so any significant movement is something to take note of. Homebuyers should rest assured that new home building will continue to relieve their supply constraint in the long-run.”
Economists had forecast that starts fell 3% in March at a seasonally adjusted annual rate of 1.25 million and that permits rose 2.8% at a rate of 1.25 million.