May 23, 2017

Housing Starts Underperform

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Housing Starts Underperform

A pullback in the multifamily sector is taking the blame for a drop in housing starts last month. The Commerce Department reported Tuesday that housing starts for single-family and multifamily homes dropped 2.6 percent to a seasonally adjusted annual rate of 1.17 million units in April. 

Broken out, multifamily starts plunged 9.2 percent in April to a seasonally adjusted annual rate of 337,000 units. Single-family production, on the other hand, mostly held flat, inching up just 0.4 percent to 835,000 last month. 

"While we saw a little pause in market growth this month, single-family production is still up 7 percent since the start of 2017," says Robert Dietz, chief economist at the National Association of Home Builders. "The April report falls in line with our forecast for continued, gradual strengthening of the single-family sector throughout the year.”

Regionally, single- and multifamily housing production spiked 19.4 percent in the Midwest and by 9.1 percent in the West in April. However, starts plunged 29.2 percent in the Northeast and by 3.4 percent in the South. 

"Despite this minor pullback, builders are optimistic about market conditions and expect more consumer activity in the months ahead," says Granger MacDonald, the NAHB’s chairman. "However, builders need to be careful to manage expenses as construction costs continue to rise." 

Housing permits, a gauge of future construction, were also down in April, dropping 2.5 percent to a seasonally adjusted annual rate of 1.23 million units. Multifamily units were up 1.4 percent to 440,000 units, while single-family permits dropped 6.2 percent to 789,000.

Source: National Association of Home Builders