Housing starts receded in April, coming in at a seasonally adjusted annual rate of 1.72 million units, down 0.2% from March, according to a new report from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
Starts are still up 14.6% year over year, but the toll that market headwinds are taking on residential construction is clear, especially considering that April’s monthly slip factors in a downward revision of the March building pace to 1.73 million units. Single-family starts, in particular, sank 7.3% during the month to a rate of 1.10 million units, the slowest pace since October.
“Lower single-family construction starts in April reflects our recent builder surveys showing notably weaker confidence in the single-family market, as rising mortgage rates and building-material construction costs are driving more potential buyers out of the market,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB).
“President Biden’s plan to address housing-affordability challenges is a welcome development, but the administration needs to focus more on resolving rising lumber and building-material prices, and supply chain bottlenecks, that are raising housing costs far faster than wages.”
As Konter noted, reports of the decline in housing starts were foreshadowed earlier this week by a drop in the Housing Market Index, a builder confidence metric jointly maintained by the NAHB and Wells Fargo. The index decreased eight points to a reading of 69 in May, its lowest level since June 2021. May is the fifth-straight month that builder sentiment has fallen.
“Today’s housing starts report is more evidence that the single-family market is slowing,” said NAHB chief economist Robert Dietz. “While single-family starts are up 4.1% on a year-to-date basis, we’re expecting flat conditions for the year and a decline in 2023 as housing affordability challenges in the form of higher mortgage rates and construction costs continues to worsen housing affordability conditions.”
Construction permits also saw a decrease in April, falling back 3.2% during the month to a seasonally adjusted annual pace of 1.82 million units. Year over year, permitting is still up 3.1%, but April’s annualized rate is the lowest since November. Just as with starts, permits in the single-family space saw a sizable backtrack, dropping to an annualized rate of 1.11 million units.