Construction of new homes decreased slightly in April for the second month in a row, according to new data released today from the U.S. Census Bureau and U.S Department of Housing and Urban Development (HUD).
The new data show housing starts decreased to a seasonally adjusted rate of 1.72 million, a 0.2% decrease from the previous month and up just under 14.6% YoY. Here are the numbers:
Privately‐owned housing starts in April were at a seasonally adjusted annual rate of 1,724,000. This is 0.2% below the revised March estimate of 1,728,000, but is 14.6% above the April 2021 rate of 1,505,000. Single‐family housing starts in April were at a rate of 1,100,000; this is 7.3% below the revised March figure of 1,187,000. The April rate for units in buildings with five units or more was 612,000.
Privately‐owned housing completions in April were at a seasonally adjusted annual rate of 1,295,000. This is 5.1% below the revised March estimate of 1,365,000 and is 8.6% below the April 2021 rate of 1,417,000. Single‐family housing completions in April were at a rate of 1,001,000; this is 4.9% below the revised March rate of 1,053,000. The April rate for units in buildings with five units or more was 281,000.
Privately‐owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,819,000. This is 3.2% below the revised March rate of 1,879,000, but is 3.1% above the April 2021 rate of 1,765,000. Single‐
family authorizations in April were at a rate of 1,110,000; this is 4.6% below the revised March figure of 1,163,000. Authorizations of units in buildings with five units or more were at a rate of 656,000 in April.
What the experts are saying:
“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) and a home builder and developer from Savannah, Georgia. “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.”
“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. Single-family permits are down 2.3% on a year-to-date basis thus far in 2022.”
“The worst of the housing shortage is ending, but market equilibrium between supply and demand is still some ways off,” said NAR Chief Economist Lawrence Yun. Total housing starts were 1.72 million in April, a 14.6% leap from a year ago. The gain was driven by strong activity in multifamily construction, predominately apartment buildings, which reached a 624,000 annualized pace unit production—the highest in nearly 40 years. Single-family housing starts fell for the second consecutive month with 1.1 million units.
“Builders are responding to higher mortgage rates and are chasing rising rents, with fewer homebuyers and more renters being forced to renew their leases. Even before the rise in interest rates, apartment vacancy rates were at historic lows and rents were accelerating. Some degree of a return to the office is also fueling back-to-city living where high rises are concentrated.
“The homes-for-sale inventory in March was still essentially at an all-time low with less than a million homes on the market (April data to be released on May 19th). Around 1.5 million homes were on the market before the pandemic. Even as home sales look to trend back to pre-pandemic levels after the big surge of the past two years, inventory will not return to pre-pandemic conditions. That means home prices will get pushed even higher in the upcoming months, albeit modestly, given the supply-demand imbalance.
George Ratiu, senior economist & manager of Economic Research at realtor.com® commented:
“New residential construction is running into noticeable headwinds as the Federal Reserve’s monetary tightening, while aimed at curbing runaway inflation, increasingly pushes borrowing costs out of reach for millions of buyers. With mortgage rates surging over 200 basis points in the past four months alone, many home shoppers are hitting a hard ceiling on their budgets and demand for new homes is waning as a result. The drop-off in traffic took a toll on homebuilders’ optimism in May. The NAHB Market Index declined for the fifth consecutive month to the lowest level since June 2020 during the pandemic’s first wave, and the six-month outlook for buyer traffic shrank considerably. The silver lining for the industry is that lumber costs have been trending down, this week reaching nearly half of early March levels ($780 per thousand board feet).
“Housing markets are struggling with an affordability crisis as we move toward the midpoint of 2022. The combination of new and existing home prices at record-highs, rents hitting new thresholds and inflation at a 40-year high is leaving less money in Americans’ pockets at the end of each month. Compounding the challenge, mortgage rates have quickly jumped to levels not seen since 2009, when real estate markets were crumbling under the weight of the subprime bubble. On one hand, these factors sideline many first-time buyers looking to get a foot in the homeownership door. On the other hand, these conditions may help put housing activity on the path toward a more sustainable balance in the year ahead, a welcome change from the feverish pace brought about by the pandemic’s flood of demand. The housing supply needs more new construction at approachable prices, and the lull in buyer interest combined with lower lumber prices could give builders space to ramp up home completions. Meanwhile, on the existing home front, we are seeing a steady increase in the number of sellers listing their properties.”