Housing starts, building permits increase while single-family housing starts fall

Yahoo Finance's Ines Ferre examines U.S. housing and single-family housing data for the month of March, mortgage rates, and low housing inventory.

Video Transcript

RACHELLE AKUFFO: And speaking of housing, a slew of housing data out this week. Let's break some of that down with our very own Ines Ferre, who joins us now. What should we be keeping an eye on at the moment?

INES FERRE: Well, Rachelle, homebuilding rose last month, but if you take a look under the hood at the numbers, there's a big discrepancy between single-family homes and multifamily. So a lot of the gains we're seeing with the multifamilies. Let's run through the numbers. So overall, housing starts increased by 0.3% to an adjusted seasonal annual rate of 1.793 million units. Permits for future building increase by 0.4%. Single family housing starts-- those account for the biggest share of homebuilding-- those dropped by 1.7%. And single family permits were down 4.8 month to month.

So, again, the gains that you're seeing are with multifamily units. And a large part of this is because of the affordability problem. You've got mortgage rates now at 5%, the highest level since 2011. Monthly payments for people over a month's period has gone up by more than a couple hundred dollars. And the big problem, of course, is low inventory, so low inventory houses that have been slow to come on the market because of supply chain issues, affordability issues with also the supplies.

And then on top of that, you've got-- on top of that low inventory problem, you've got the number of transactions that has also been coming down. And that's because less houses are being sold because more people are staying in their homes. If they're locked in at a rate that's below 4%, what's to incentivize people that are already in their homes to upgrade to perhaps move to a new home if their rates are already locked in below that 4%?

And I will note that there's been a lot of commentaries about 5% still being a low mortgage rate, which is historically a low mortgage rate still. But you have to keep in mind that the prices, the housing prices, the house prices are at their highest levels ever. So you've got the median house price right now that is around $400,000. That's the highest ever.

DAVE BRIGGS: It's incredible. Ines Ferre, thanks so much with that housing data. And guys, the big question moving forward is some have been talking about a potential housing bubble. We've only seen these conditions recently, back in 2008, when that, of course, led to the crash. And this was fuel to the fire was added from the Dallas Fed in a blog post a few weeks ago, saying that housing fundamentals are out of step with the market fundamentals right now, leading a lot of experts to say, maybe this is a housing bubble, and maybe it's going to burst.

But getting back to Ines's point there, Brad, I just don't see it because of that lack of inventory. And demand is staying high. Yeah, mortgage rates are at 5% on the 30-year fixed, but the inventory is not going anywhere for several different reasons. Therefore, I just don't see a bubble bursting at any time soon.

BRAD SMITH: And there are several factors that play into this as well because one key thing that Ines did mention is the fact that it is so much of the multifamily homes right now that are seeing that boom in growth of the number of construction starts that are taking place right now.

That continues to bring us back to the fact on the other side of this broader housing sector that you're seeing so many of those single family homes either being stalled at the largest point since 2006, which matches with the homebuilder sentiment being at the lowest level since 2006, because they're not able to deliver on so many of those different projects that they have started construction on, whether it be supply chain issues or whether it be trying to ensure that the price tag that has moved, that they're able to communicate that to the necessary buyer and that the funding is still going to come through, especially on the buy side.

RACHELLE AKUFFO: And you have to imagine this is a frustrating time. If you're seeing rents go up, so you're like, oh, this is a good time for you to try and get into a house, there is no inventory. We saw from the Commerce Department you have this record backlog of homes approved for construction, but that hasn't been started. And that, of course, adds to what we saw with that homebuilder sentiment for single-family homes dropping to that seven-month low in April. So you're sort of stuck between a rock and a hard place, between affordability and supply chain issues, as well as, obviously, a lack of inventory. So, obviously, a very tough time there for some of these first-time buyers.