• After falling by close to 19% in March, U.S. housing starts fell another 30.2% in April to 891k units (annualized). The April tally came in well below the market consensus forecast, which called for a 927k-print, and marked he weakest showing since early-2015.
  • Starts pulled back in both the single-family and multi-family segments, with the former down 25.4% (or -221k) to 650k units in April and the latter down 40.5% (or -164k) to 241k.
  • The decline was widespread on a regional basis, with all four regions reporting steep contractions in April. The Northeast (-43.6%) led the way, followed by the West (-43.4%), the South (-26.0%) and the Midwest (-14.9%).
  • Building permits were not spared either, falling by 20.8% to 1.074 million in April. The decline here was concentrated in the single-family segment, where permits fell by 24.3% (or -215k) on the month. Multi-family permits on the other hand, fell by 14.2% (or 67k).

Key Implications

  • While construction was classified as an essential business in most states, homebuilders kept the pedal off the metal on new projects in April. Another major leg down in starts was anticipated given plunging homebuilder confidence last month as COVID-19 took a firmer hold of the country and the unemployment rate skyrocketed to double-digit territory. Still, the decline was larger than expected.
  • As swathes of the economy begin to reopen and Americans on temporary unemployment gradually return to work, homebuilding should slowly begin to rebound. Aiding this turnaround will be a supportive mortgage rate environment (for more on rates, see here). A slight improvement in homebuilder confidence this month, after April’s record plunge, is an early signal that adds credence to this view.
  • Nonetheless, the pandemic will have some permanent scarring effects on the labor market, the degree of which remains uncertain. Reduced international travel and a temporary moratorium on new immigrants, which will weigh on household formation, are added elements that don’t bode well for homebuilding. As such, despite the expected change in direction later this year, the level of new homebuilding activity is likely to remain subdued for some time.


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