Overall housing starts increased by 5.7% month over month to a rate of 1.36 million units in April, boosted by a surge in multifamily building, according to the U.S. Census and the Department of Housing and Urban Development.
Starts for properties with five or more units raced to a 322,000-unit pace in April, up 31.4% to comprise the entirety of April’s gain in total starts. Despite the April upswell, however, multifamily building, which is highly volatile and prone to large swings in pace month over month, remains on a downward trend.
Meanwhile, single-family starts, which make up the vast majority of residential building, were essentially flat, ebbing to a rate of to 1.03 million units from 1.04 million units in March. The minute drop was the second straight decrease on a month-to-month basis. Single-family starts are still up by 25.7% year-to-date, thanks to a strong activity to open the year.
Year over year, total residential starts were virtually unchanged, down 0.6% from April 2023.
A pick-up in mortgage rates, which exceeded 7% by the end of April, has held back starts, sidelined many buyers and thawed homebuilders’ confidence in the market. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, logged its first drop in May since November 2023, falling to a reading of 45; index readings over 50 indicate that more builders see current conditions as good rather than poor.
“While the start of the year has seen an expansion for single-family home building because of a lack of existing home inventory, home building activity leveled off in April as higher interest rates, tighter lending conditions and lower home building sentiment acted as headwinds on new home construction,” said NAHB Chairman Carl Harris. “Lower interest rates, particularly for builder and developer loans, will help builders to increase the pace of home construction in the months ahead.”
Permitting slipped, too, ending April at an annualized rate of 1.44 units, down 3.0% from March and 2.0% from April last year. Single-family permits saw a rate of 976,000 in April, down 0.8% from March. The pullback is slight, but it’s the third straight decrease in single-family authorizations, foreshadowing a slowing in single-family construction in the months ahead.
