America’s housing market is pulling a classic “gas and brake” move. March housing starts surged 10.8% to an annualized pace of 1.5M homes, marking the strongest reading since Dec. 2024. This increase came despite the Iran war pushing up materials costs, with a gauge of homebuilder sentiment slipping to a seven-month low in April.

• Still, the same report showed building permits fell to a 1.37M pace, the lowest since August, with single-family down 3.8%, pointing to caution in the months ahead.
• Simultaneously, purchase applications rose 21% from a year earlier, even as rates hit 6.37%, suggesting buyers are slowly adjusting to the higher-rate environment.

The housing divide: Bloomberg Economics’ Stuart Paul noted March data beat expectations, though permits show builders remain “somewhat cautious.” On the demand side, MBA chief economist Mike Fratantoni said buyers “appear to be moving forward this spring” as inventory improves. With rates still high and the Fed holding steady, builders are breaking ground today but pulling back on tomorrow’s pipeline.