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April Construction Numbers Muted After March’s Poor Showing

Housing starts played out flatly heading into April 2024, with total housing construction increasing 5.7% to 1.36 million units. Single family housing construction dropped 0.4% from March to a seasonally adjusted annual rate of 1.03 million units, according to data released by the government census bureau.

The slight rebound comes after a sharp decline in March housing starts, where housing starts fell nearly 17% in stark contrast to analyst expectations following a strong start to 2024.

The total number of housing starts in April fell just short of Wall Street’s expectations for the market, which sat at around 1.40 million units. Total housing starts in April were mainly bolstered by a surge in multi-family construction, which leapt 31.4% compared to March 2024.

On a region-by-region basis, the Northeast suffered the most with combined single-family and multifamily starts down 24.5% YTD. The Midwest, South and West fared better with rates rising 11.0%, 1.8% and 8.4% respectively.

Analysts say that despite the prevailing lack of inventory that still exists in the market, the high mortgage rates (which now hover around 7%) are largely to blame, with higher rates expected to pressure the industry as the year progresses.

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Though federal policy makers have become less direct as to when they plan to enact rate cuts, there is a majority opinion among experts that September will be the earliest month for rate cuts as sticky inflation continues to flummox policy makers.

“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 Carl Harris, chairman of the NAHB and a custom home builder from Wichita, Kansas, in a press release discussing April’s construction numbers.

There is also prevailing sentiment among homebuilders that multi-family construction will see more declines despite its elevated pace currently.

“Moving forward, the multifamily market will see additional declines for construction volume, while the pace of completions remains elevated,” said NAHB Chief Economist Robert Dietz.

“April marked the fifth consecutive month for which the seasonally adjusted rate of multifamily completions was above 500,000. This additional rental supply will help lower shelter inflation, which is the last leg of the inflation policy challenge.”

The number of building permits also dropped for the month of April, with total permits being taken out dropping 3.0% from March to 1.44 million, down 2.0% from April 2023. Single-family permits dropped 0.8% to 976,000 from March.

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