US: Housing Starts Rose and Permits Fell in April

Housing starts rose by 2.2% month-on-month (m/m) in April to 1.40 million (annualized) units, in-line with consensus expectations. Revisions to the three prior months were negative, subtracting roughly 39k units from the previous reported tallies.

Starts in the single-family segment rose by 1.6% m/m (or 13k units) after falling by 0.2% in March. Multi-family starts also ticked up, rising by 3.2% m/m (or 17k units) after seeing a sharp decline in the previous month.

Residential permits fell in April by 1.5% m/m to 1.42 million units. The decline was led by a strong reduction in multi-family permitting which fell for a second consecutive month. Meanwhile, single-family permits rose for a third consecutive month in April, ticking up by 3.1% m/m.

Among the four Census regions, housing starts fell in the Northeast (-23.4% m/m) and the South (-6.3% m/m). The West and Midwest regions each recorded sizeable monthly gains of 34.6% m/m and 32.6% m/m, respectively.

Key Implications

Homebuilding activity was mixed in April, with starts picking up in both the single-family and multi-family segments, while permitting activity fell for a second month on multi-family weakness. However, single-family permitting activity has seen a solid rebound to start 2023 after contracting for most of last year. While there are some signs of positivity in this report, starts and permits each remain roughly 20% below year-ago levels.

The National Association of Home Builders’ Housing Market Index – a measure of homebuilder sentiment in the single-family market – rose for a fifth consecutive month in May to its highest level since July 2022. Homebuilders have become increasingly optimistic about the outlook for residential construction as the past few years of excess demand has drained the housing market of supply. In addition, with mortgage rates remaining near a 15-year high, many potential sellers cannot afford to re-enter the market, which has kept the stock of existing homes for sale low. With new homes now making up roughly one-third of all sales, residential construction is expected to continue to play a large role in returning affordability to the U.S. housing market.