Housing Starts Post Healthy April Gain

Housing starts rose by nearly 6 percent in April, as both single-family and multifamily units posted healthy gains, HUD and the Census Bureau reported yesterday.

The report said privately owned housing starts in April rose to a seasonally adjusted annual rate of 1.235 million, 5.7 percent higher than March’s revised 1.168 million, but 2.5 percent lower than a year ago (1.267 million). Single‐family housing starts in April rose by 6.2 percent to 854,000 from March’s revised 804,000; the April rate for units in buildings with five units or more rose to 359,000, an improvement of 2.3 percent from 351,000 in March and 1.4 percent from a year ago.

Regionally, huge gains in the Northeast and Midwest offset declines in the South and West. In the Northeast, starts jumped by nearly 85 percent to 144,000 units, seasonally annually adjusted–its highest level in more than a year–compared to 78,000 units in March, and improved by nearly 49 percent from a year ago. In the Midwest, starts rose by 42 percent to 186,000 units in April from 131,000 units in March and improved by 17 percent from a year ago.

The South saw a 5.7 percent drop in starts to 581,000 units, seasonally annually adjusted, in April from 616,000 units in March and fell by 12.2 percent from a year ago. In the West, starts fell by 5.5 percent to 324,000 units in April from 343,000 units in March and fell by 7.2 percent from a year ago.

“Housing starts bounced back in April, following weaker readings in February and March,” said Mike Fratantoni, Chief Economist with the Mortgage Bankers Association. “Starts and permits data show weakness in the South, particularly for single-family construction. Other data, including the builder confidence index and MBA’s mortgage applications for new homes, are showing stronger growth than the permits and starts data imply. This could indicate that April’s starts data may be revised upwards in the months ahead.”

Odeta Kushi, Deputy Chief Economist with First American Financial Corp., Santa Ana, Calif., said the April report gives the housing industry a brightened outlook.

“Rising demand from Millennials aging into homeownership and limited supply, partly from baby boomers aging in place, will continue to put pressure on the housing market,” Kushi said. The month-over-month increase in single-family housing starts to a pace of 854,000 SAAR is an improvement towards meeting this demand, but falls short of the 1.2 million units that demographics would support.”

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., called the housing starts data “a ray of sunshine for residential building.”

“New residential construction finally appears to be improving against a backdrop of lower mortgage rates, strengthening new home sales and improving builder sentiment,” Vitner said. “That said, even with lower mortgage rates and better weather, home building is struggling to regain traction. Year-to-date, both single-family and multifamily starts are running below last year’s levels, and total starts through April are 7.2% below the same period last year. Building activity topped out in early 2018, however, which means year-over-year comparisons will get easier going forward.”

The report said privately owned housing units authorized by building permits in April rose to a seasonally adjusted annual rate of 1.296 million, 0.6 percent higher than the revised March rate of 1.288 million but 5 percent lower than a year ago (1.364 million). Single‐family authorizations in April fell by 4.2 percent 782,000; this is 4.2 percent (±1.2 percent) below the revised March figure of 816,000. Authorizations of units in buildings with five units or more rose to a rate of 467,000 in April, up by 7.1 percent from March (436,000 units) and an improvement of 1.5 percent from a year ago.

HUD/Census said privately owned housing completions in April fell to a seasonally adjusted annual rate of 1.312 million, 1.4 percent below the revised March estimate of 1.331 million but 5.5 percent higher than a year ago (1.244 million). Single‐family housing completions in April fell by 4.1 percent 918,000 in April from March’s revised 957,000; the April rate for units in buildings with five units or more rose by 5.8 percent in April to 381,000 from 360,000 in March but fell by 14.2 percent from a year ago.

“Both the number of building permits issued and housing starts increased to three-month highs, indicating that home builders are pushing through new construction projects despite supply-side headwinds, such as a shortage of labor, costly regulations and a shortage of buildable lots,” Kushi said. “The positive report supports a brighter outlook for the housing sector in 2019, as demographics and low mortgage rates continue to support demand.”