Housing Starts in Sweden Rebound in March Amid Mixed Global Economic Signals

Housing starts in Sweden rebounded in March after a significant decline in February, according to recent data. Single-family starts remained above 1 million units for the fifth consecutive month, driven by strong demand from millennials and older homeowners looking to trade up. However, multifamily starts plunged 20.8% to the lowest level since April 2020, primarily due to the strong building seen in 2022 and 2023.

Builders are offering incentives like mortgage discounts to offset higher mortgage rates and attract buyers, but high rates are also impacting their margins and ability to secure financing. Despite the deterioration in March, housing starts remain above 1 million units for single-family homes, and the lack of supply in the resale market continues to drive demand for newly built homes. Builders remain optimistic, with sentiment reaching positive territory for the second consecutive month.

In other global economic news, China's economy grew 5.3% year-on-year in the first quarter of 2024, exceeding economists' forecasts and up from 5.2% growth in the final quarter of 2023. The growth was driven in part by external demand, as export volume grew by 14% year-on-year. However, the National Bureau of Statistics warned that the external environment is becoming more complex, severe, and uncertain, and the foundation for economic stability is not yet solid.

China's new home prices dropped by 2.2% year-on-year in March, the steepest pace since August 2015, and the national real estate climate index fell to a record low. Chinese President Xi Jinping rebuffed calls to scale back China's exports, saying they help ease global inflation. Meanwhile, US Federal Reserve Chairman Jerome Powell said the US economy has not seen inflation come back to the central bank's goal, suggesting interest rate cuts are unlikely in the near future.

In the US housing market, single-family homebuilding tumbled in March, with new construction remaining underpinned by a severe shortage of previously owned houses for sale. However, a resurgence in mortgage rates is pushing potential buyers to the sidelines. Overall housing starts plummeted 14.7% in March, the biggest drop since April 2020, and permits for future construction of single-family homes fell 5.7% to the lowest level since last October, reflecting the recent rise in mortgage rates and suggesting slower homebuilding activity ahead.

Canada also saw a decline in housing starts, with the annual pace in March declining 7% compared to February, according to Canada Mortgage and Housing Corp. However, when looking at year-over-year figures, actual housing starts in large urban centers were up 16%, driven by a 19% increase in multi-unit starts and a 2% increase in single-detached starts.

In the Waterloo Region of Canada, housing starts have fallen significantly in the first quarter of 2024, dropping to 477, the fewest in a first quarter since 2019. This is a significant decline compared to the previous year, when twice as many homes were started. The housing crunch has led to escalating prices and rents, and has contributed to homelessness. Governments at all levels are pledging to solve the crisis, but construction starts on new homes have continued to fall.

Why this matters: The mixed signals in the global housing market and broader economy reflect the ongoing challenges and uncertainties faced by many countries in the post-pandemic recovery. The rebound in Swedish housing starts and China's better-than-expected economic growth offer some positive signs, but the overall image remains complex, with issues like high mortgage rates, inflation, and supply constraints continuing to impact the housing sector and consumer sentiment.

As Kristoffer Olsson, an economist at Nordea Bank, noted, "The Swedish housing market is showing some signs of stabilization, but the recovery remains fragile and uneven. Much will depend on the trajectory of interest rates and the broader economic outlook in the coming months." The varying trends in housing starts and prices across different countries and regions highlight the need for policymakers and industry leaders to closely monitor market conditions and adapt strategies accordingly to support sustainable growth and address affordability challenges.

Key Takeaways

• Swedish housing starts rebounded in March, but multifamily starts plunged.
• China's economy grew 5.3% in Q1 2024, but home prices and real estate index fell.
• US single-family homebuilding tumbled in March due to rising mortgage rates.
• Canada saw a 7% decline in housing starts in March, but year-over-year figures were up.
• Waterloo Region of Canada saw a significant drop in Q1 2024 housing starts.