Weekly Transportation Update: Housing Starts Ease After Strong February

Key Takeaways

• Housing starts ease after solid February gain.
• Sales of existing homes fall after February’s surge.
• Continued jobless claims highest since late 2021.
• Mortgage rates reverse downward trend.
• Diesel prices rise, ending extended slide.
• Van spot rates see largest drop since January.
• Carloads rebound after Easter-related decline.
• Rail employment figures are a cause for concern.
• Intermodal’s struggles likely are longstanding.

Overview

This week was light for economic indicators. The most important were related to the housing sector and showed mildly negative moves in March after strong gains in February. Meanwhile, mortgage rates rose after five straight weeks of declines.

Unemployment benefits saw a notable change as well as ongoing claims for unemployment benefits rose to their highest level since November 2021 on a seasonally adjusted basis.

Housing starts and permits

Housing starts eased 0.8%, seasonally adjusted, in March following a downwardly revised gain of 7.3% in February. Initial February estimates had shown a 9.8% jump m/m. Starts in March were 9.6% behind the pre-pandemic month of February 2020.

Starts of single-family homes were up 2.7% m/m while those of units in multi-family buildings of five or more units fell 6.7%. However, multi-family starts were still 5.4% ahead of February 2020 while single-family starts were 17.1% behind.

Permits authorized for future residential construction fell 8.8% from the downwardly revised 15.8% jump in February. Permits were 3% below February 2020. Single-family permits were up 4.1% while multi-family permits fell 24.3%.

Housing completions eased 0.6% after jumping 12% in February. Homes under construction declined 0.8% for the third straight decrease. The number of single-family homes under construction declined for the 10th straight month while the number of multi-family units has risen in every month since December 2020 except July 2021 when units under construction were flat m/m.

Sales of existing homes

Sales of existing single-family homes fell 2.7%, seasonally adjusted, in March after jumping a downwardly revised 14.2% in February. Sales were down 21.1% y/y and 21.9% compared to February 2020.

The inventory of homes for sale at current sales rates ticked up to 2.6 months from 2.5 months in February, but the March inventory otherwise was the tightest since May 2022.

The median price of a single-family home sold in March was $380,000, up 3.2% from February but down 9.7% from the all-time high in June 2022. The medium sales price was still 39.3% above the price in February 2020, however.

Mortgage rates

After five straight weeks of decreases, mortgage rates moved higher in the latest week. The average rate on a 30-year fixed-rate mortgage was 6.39%, up from 6.27% in the prior week, according to Freddie Mac, which said that affordable housing continues to be a serious issue for potential homebuyers. Freddie Mac said that demand would recover only modestly unless rates drop into the mid-5% range.

Unemployment benefits

While initial claims for unemployment benefits rose only slightly in the latest week, continued claims for benefits jumped by 61,000, seasonally adjusted, to 1.87 million, which is the highest level since late November 2021. The four-week moving average of 1.83 million was the highest since mid-December of that year. However, unadjusted continued claims fell slightly to 1.79 million, which is the lowest level since just before the December holidays last year.

Diesel and petroleum prices

Diesel prices finally stopped falling in the latest week. The national average price for the week ended April 17 was $4.116 cents a gallon, which is nearly 99 cents lower than it was a year earlier.

As was the case in the prior week, the Midwest region saw notably higher prices. The average price in the Midwest rose 5.9 cents a gallon. All other regions saw either a decrease in prices or a gain of less than 1 cent.

Underlying factors are sending mixed signals regarding where prices might go in the near term. Inventories of ultra-low sulfur distillate nationwide declined in the latest week to their lowest level since late November of last year. On the other hand, production was at its highest level since just before the December holidays.

Meanwhile, crude prices have eased slightly in the most recent trading, closing at $77.29 on April 20, which was the third anniversary of the wild trading day when crude prices closed in negative territory as sellers were desperate to offload their June commitments during pandemic lockdowns.