April’s housing starts came in at 1.23 million units, a welcome increase from the revised March figure of 1.17 million. The revised Q1 average now sits at 1.2 million units, in line with our forecast. The number of single-family housing starts rose last month as multifamily began to recover from losses at the end of 2018.
The Northeast and Midwest regions posted strong gains on both a monthly and yearly basis for both single and multifamily units. A firm job market, above-average temperatures and declining mortgage rates helped fuel that growth. Near record precipitation in the South caused month-over-month declines in single and multifamily starts. In the West, single-family starts continued to climb as multifamily starts declined. Rising construction costs and strict zoning laws in the hottest markets in that region continue to impact the availability of housing.
Permits for new construction increased modestly in April by 0.6%. That reversed a three-month decline but was still below the year-ago level. The losses occurred in single-family units; multifamily starts soared to a 13-month high. Homebuilder sentiment in May inched up as mortgage rates fell. Despite the lower rates, applications for mortgages and refinancing are declining.
Escalating trade uncertainties are creating new headwinds in the housing market. Increased costs for materials, land and labor are partly to blame for supply shortages, which in turn reduce affordability and constrain entry-level and low-income buyers’ participation.
We could finally see a spring thaw in the housing market if conditions encourage builders to change course and build more affordable, entry-level housing.
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