Even with a massive housing shortage across the nation, homebuilders are completing their pipelines and not seeking as many permits to construct new single-family houses.
Privately owned housing starts climbed to a seasonally adjusted annual rate of 1.360 million units, up 5.7% month over month and down 0.6% year over year, according to a report released Thursday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD).
The growth, however, was driven by multifamily housing starts, which ticked up to 322,000 units. Single‐family housing starts in April fell to 1.031 million units, 0.4% below the revised March figure of 1.035 million. Starts of new units in multifamily buildings also continue to track far below year-ago levels, according to Bright MLS chief economist Lisa Sturtevant.
The rate at which building permits were issued in April also dropped. It fell by 3% month over month to a seasonally adjusted annual rate of 1.440 million. It was down by 2% from the same time last year. Notably, the number of single-family authorizations was down 0.8% month over month in April to a rate of 976,000 units. Meanwhile, multifamily authorizations decreased to a rate of 408,000 units. Mortgage rates, which remain firmly above 7%, have cooled builders’ interest in new construction.
“Given the recent declines in housing starts, home completions will steadily show declines in about six months,” Lawrence Yun, chief economist for the National Association of Realtors (NAR), said in a statement. “The housing shortage is not going away. The laws of supply and demand tell us that home prices are on firm ground and could even reaccelerate in the future unless more is done to boost supply.”
Housing completions picked up significantly in April compared to March, increasing by 8.6% to 1.623 million units. It was the second-highest monthly figure in 15 years, Yun said. Single‐family completions rose by 15.4% between March and April to a rate of 1,093 million. Meanwhile, multifamily completions came in at a rate of 516,000 in April.
In May, 25% of builders cut prices, up from 22% in April. But the average price reduction in May held steady at 6% for the 11th straight month. Meanwhile, the use of sales incentives rose to 59% in May, up from 57% in April. Builders have also been building smaller homes designed to be more affordable to meet starter-home and mid-tier market demand.
“The new housing sector has been an outsized share of the market for the past couple of years,” Sturtevant said in a statement. “Recently, the supply of existing homes has increased as more homeowners are listing their homes for sale. More supply should give buyers more choices late this spring and into the summer. Buyers who might have thought new construction was their only option might find more choices on the existing home side.”
Homebuilder confidence dwindled in May due to high mortgage rates and because of new regulations that require HUD and the U.S. Department of Agriculture to insure mortgages for new single-family homes only if they are built to the 2021 International Energy Conservation Code, which trade groups say would increase the cost of construction.
