Housing Starts Rose, Permits Fell In April

Residential construction saw mixed results in April as builders approach the high-rate environment with caution.

Housing starts were up by 5.7% to a 1.36 million annualized rate last month but down 0.6% YOY, according to data from the U.S. Census Bureau.

Analysts expected construction to rise, which it did– but by far less than the 1.42 million rate forecasted.

Permits slipped, down 3% from March’s revised rate of 1,485,000 and 2% YOY. This is the third straight month that this future construction indicator has fallen. It’s now at its lowest level since August.

The data suggests builders are moving cautiously as mortgage rates remain elevated. Rates averaged 7.09% last week, an improvement after a long spell of increases but still far too high to entice rate-locked homeowners or affordability-minded buyers to enter the market.

Notably, builder sentiment tanked in April, the first decline since November 2023.

“A lack of progress on reducing inflation pushed long-term interest rates higher in the first quarter and this is acting as a drag on builder sentiment,” said NAHB Chief Economist Robert Dietz. “The last leg in the inflation fight is to reduce shelter inflation, and this can only occur if builders are able to construct more attainable, affordable housing.”

Recent government data found that the U.S. economy added 175,000 in April, below expectations of 240,000, while the consumer price index showed favorable numbers.

This was good news for the Central Bank, which is watching the jobs report closely in its inflation fight. Comments from Federal Reserve Chair Jerome Powell suggested that the Fed still intends to cut rates at some point, not hike again, leading to easing treasury yields.

If rates sustainably move down in the coming weeks, more buyers and sellers may enter the market between now and June, a period which is typically a busy season for homebuying.

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