Stocks wobble as earnings roll in, Powell comments on inflation

New residential construction, including single-family and multifamily homes, tumbled by the largest amount in four years as rising mortgage rates weaken housing activity.

Housing starts fell 14.7% month over month in March, dropping from a 1.55 million units annualized pace to 1.32 million units annualized, according to data from the Census Bureau released Tuesday. Single-family starts fell 12.4% month over month.

According to LPL Financial’s chief economist, Jeffrey Roach, the data indicates how new home construction is “starting to show cracks in the pace of growth.”

“Housing construction is poised to slow as potential homebuyers indicate now is a poor time to buy a home. Investors should expect residential investment becoming a drag on GDP growth in the coming quarters. Housing activity may not fully stabilize until the Fed commences their easing cycle.”

The fresh government data comes after builder sentiment in April was flat from the previous month, breaking four consecutive months of gains. The NAHB said, “Buyers are hesitating until they can better gauge where interest rates are headed.”

“Looking ahead, we still think single-family starts stand to benefit from the lack of second-hand homes on the market, shifting demand to newbuilds,” Thomas Ryan, property economist at Capital Economics, wrote in a note to clients following the release.

“But that strength will be offset by weakness in multi-family starts, which we expect will remain around current levels, leaving total housing starts little higher than they currently are by the end of this year.”

The SPDR S&P Homebuilders ETF (XHB) was trading lower by more than 1% Tuesday morning.

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