What April’s new home construction data says about the housing market

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In April, housing starts for single units fell 7.3% month over month.

Stefani Reynolds/AFP via Getty Images

New home construction gauges showed signs of a slowing housing market, according to preliminary data released Wednesday, but not all parts of the market appear to have collapsed.

Building permits in April fell 3.2% from March to a seasonally adjusted annual rate of 1.82 million, according to the new Residential Construction Report from the Census Bureau and the Department of Housing and Housing. of urban development. Housing starts, meanwhile, fell 0.2% from March to a seasonally adjusted annual rate of about 1.72 million. However, with such a small change, the Census Bureau noted that “there is insufficient statistical evidence to conclude that the actual change is different from zero.” Consensus estimates predicted a drop in both measures.

March’s building permit rates were revised upwards, while housing starts rates were revised downwards.

Despite the month-over-month declines, both metrics were higher than a year ago. Housing starts rose 14.6% from the same month in 2021, while permits rose 3.1% year-over-year.

Investors and economists are watching the government’s metrics of housing starts – the start of new home construction – and building permits – a gauge of approvals granted for building new homes – for signs of strength or weakness. weak housing market.

Overall, housing starts were “resilient surprisingly well in the face of significantly higher mortgage rates,” Jefferies economists Aneta Markowska and Thomas Simons wrote in a Wednesday note, but that strength was not evenly distributed among the types of accommodation. “Multifamily construction has taken off just as demand for single-family homes is beginning to crack,” the economists wrote.

In April, single-unit starts fell 7.3% month-over-month, while starts of five or more units rose 16.8%. While permits fell across unit types, permits for residences with five or more units posted the smallest drop, slipping 0.6% month-over-month from a 4-month drop. .6% for housing permits.

The release follows a weaker-than-expected builder confidence gauge released on Tuesday. The National Association of Home Builders‘ Housing Market Index, which gauges builders’ views on the market for new single-family homes, fell eight points in May to its lowest level since June 2020.

“Today’s housing starts report is further evidence that the single-family home market is slowing,” Robert Dietz, chief economist for the trade group, said in a statement on Wednesday. He said he expects single-family home starts to be flat in 2022 and fall in 2023 due to rising mortgage rates and construction costs.

Write to Shaina Mishkin at [email protected]