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April’s housing data underscores a challenging landscape for new construction, particularly in the single-family segment, and the privately-owned segment isn’t far behind.
Builders are navigating a complex mix of elevated costs, rising mortgage rates and waning consumer confidence, which is weighing heavily on the market.
Odeta Kushi | First American Deputy Chief Economist
“Builders’ growing pessimism is partially driven by the increase in mortgage rates in April, which impacts both builder and buyer financing costs,” First American Deputy Chief Economist Odeta Kushi said in a statement. “Residential construction costs are still more than 40 percent higher compared to pre-pandemic levels and skilled labor shortages persist.”
Policy instability is another source of strain. “Policy uncertainty also weighs heavily on builder sentiment, with 78 percent of builders reporting difficulties pricing their homes recently due to uncertainty around material prices,” Kushi noted, citing NAHB data. “The recent announcement that the United States and China will reduce tariffs for 90 days may offer temporary relief and brighten the outlook.”
This backdrop of uncertainty is reflected in the numbers, a new data report from the U.S. Census Bureau and the Department of Housing and Urban Development (HUD) indicated.
Source: U.S. Census Bureau and the Department of Housing and Urban Development (HUD)
Privately-owned housing starts in April rose modestly, up 1.6 percent from March to a seasonally adjusted annual rate of 1,361,000, though they remain 1.7 percent below the April 2024 level. Single-family starts dropped 2.1 percent to 927,000. Meanwhile, multifamily activity climbed from 371,000 to 420,000 from March to April.
Completions followed a similar pattern. Privately-owned housing completions fell 5.9 percent from the previous month to 1,458,000 and 12.3 percent year over year. Single-family completions declined 8 percent to 943,000, while multifamily completions edged up from 503,000 in March to 507,000 in April.
Permits — a forward-looking indicator of new builds — also declined. Permits for privately-owned housing units dropped 4.7 percent to 1,412,000, while single-family permits fell 5.1 percent to 922,000. Multifamily permits decreased from 445,000 units to 431,000.
“The April report was not a great one for single-family housing, with single-family starts, permits and completions all declining,” Kushi said. “The slower pace of single-family permits suggests a reduced rate of single-family groundbreaking in the upcoming months, due to higher inventory levels in key markets and ongoing challenges with costs and affordability.”
Builder sentiment has dropped accordingly. In May, it fell to the same level seen in November 2023, matching a trough not seen since December 2022. “This growing pessimism was broad-based across all NAHB Housing Market Index (HMI) components,” Kushi added.
Still, there may be some relief on the horizon. Kushi remains cautiously optimistic.
“The long-term housing shortage, builders’ ability to offer incentives, and potentially less restrictive monetary policy could be tailwinds,” she said.
