The severe drought plaguing the West may stall new-home construction in the region, according to the chief economist of the National Association of Home Builders.
Housing starts in the West dropped for the third consecutive month, falling 19 percent in March and reaching its weakest level since May. The drop came at a time when other regions of the U.S. rebounded from a harsh winter.
Read more: What Calif.'s Drought Could Mean for Housing
The drought in the West may discourage companies from building or taking out permits for new construction, says David Crowe, NAHB’s chief economist. Some builders may be hesitant due to uncertainty surrounding local water policy and the ability to obtain water connections for new homes or apartment buildings, he told Bloomberg.
"Until it's clear what restrictions mean for new building, it's wise for builders to be hesitant," Crowe says. "This is more serious than just a temporary dry period. This is a new regime that says it's going to be harder to obtain additional water usage."
About 21 percent of the U.S. fell in the "moderate" to "extreme" drought categories at the end of March, with cases most severe reported in California and parts of Nevada and Wyoming, according to the National Climatic Data Center.
In California, Gov. Jerry Brown recently ordered the state's first mandatory water restrictions. The state is seeking to drop its use of water by 25 percent. The restrictions include a requirement that new homes feature water-efficient irrigation if the builder plans to use portable water for landscaping.
Source: "The Drought’s Latest Victim Out West Is the Housing Market," Bloomberg (April 16, 2015)
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