It appears the 2016 “pent-up demand” story didn’t last very long. The Census Bureau just reported that housing starts and permits both fell during March. What is interesting is that single-family starts fell 9.2 percent from revised February numbers, posting at a seasonally-adjusted annual rate of 764,000 units. Single-family authorizations fell 1.2 percent from February figures.  Housing starts and permits are higher year-over-year, but much of the increase in activity is due to lenders “expanding the credit box”, not necessarily from increased demand in general. The mortgage industry realizes that many buyers cannot afford today’s home prices so they are coming up with more creative ways to ask fewer questions. Mortgage rates remain near record low levels, because the Fed (govt) knows that higher rates will cause home sales to tank.

I have detailed why new home construction has been weak in Houston, with new home prices rolling over even in the face of intentionally-constrained supply. The problem for builders at a national level is that it’s difficult to bring a quality home to market at affordable prices when they are paying for inflated land prices. It goes back to the Fed artificially manipulating markets and levitating asset prices. This has created a new crisis in the U.S. housing market.

Here locally, we have dramatically lower demand courtesy of energy sector job losses. That has made a difficult situation for builders even worse because there are fewer people to absorb all of those expensive homes that builders were/are producing. Sales are tanking on the higher end, but builders can’t build enough affordable homes to bolster sales because land prices have still not corrected to sustainable levels. Investors are still picking up some properties (enough to keep demand looking respectable), but more people are coming to realize the con game the Fed has been playing.