Builders broke ground of 1.2 million new housing units in March, compared to 1.56 million in February. That’s a decline of about 22 percent as the U.S. housing industry enters its’ busiest construction season of the year.
Construction of new single-family homes dropped 17.5 percent; apartment and condo starts plummeted 32.1 percent from last month, according to the U.S. commerce department.
March also saw a 6.8-percent contraction in construction permits granted in March, indicating the construction will slow further in April and May.
New home completions declined 6.1 percent from February, indicating thousands of partially-built dwellings have been abandoned. The rate was 15 percent among single-family homes. This could mean “ghost developments” of half-built houses that couldn’t be completed because developers were unable to sell the houses or sustain their financing.
March’s housing plunge was the worst since March 1984, when new home construction retrenched by 26.4 percent.
Home builders are losing confidence as fast as they lose projects.
A survey among builders conducted by Wells Fargo and the National Association of Home Builders found that builders’ confidence cratered from a reading of 72 in March to 30 in April, the greatest single monthly fall since the index began in January 1985.
A rating above 50 is positive, below 50 signals a glum outlook.
The rating of 30 is the first negative rating since June 2014.
TREND FORECAST: We maintain our forecast for a real estate depression.
Already, sales of existing homes fell a wider-than-expected 8.5 percent in March, according to the National Association of Realtors’ index.
And, the National Association of Realtors’ estimates sales could decline 30 percent to 40 percent.
There will be hot spots, however, to buy in both residential and commercial real estate… and warehouses is one of them.
Hot Real Estate Investment: Warehouses
Warehouse owners and developers see companies needing more storage space – not only now as consumer demand vanishes for many products already made, but also in the future.
Observers are betting the economic “new normal” will involve businesses keeping more raw materials and finished products on hand as a safety precaution to keep up manufacturing and sales – and to keep workers employed – if another pandemic strikes.
Flexe, a Seattle company that finds storage space for businesses, says retailers are grabbing warehouse space to store their wares as they shut brick-and-mortar stores. Online companies that sell to consumers are seeing business boom, requiring them to have more goods on hand ready for shipment. Those goods have to be stored.
Some analysts believe the greater demand for warehouse space is permanent.
During the lockdown, they contend, consumers will develop buying habits that will persist, such as buying groceries online and stockpiling extra cleaning supplies and toilet paper.
Over the next five years, 75 to 100 million new square feet of temperature-controlled warehousing will be needed as buying food online becomes standard for more people, according to CBRE Inc., the former Coldwell Banker realty chain.
Walmart sold almost $900 million in groceries, a spike of 21 percent above February and almost double that of March 2019, according to 1010data, a company that tracks credit- and debit-card sales.
