Housing starts stumble in April

Supply Constraints Slow Home Building

Housing starts fell 9.5% in April to a 1.569 million-unit pace. The drop was larger than expected, but only slightly so, and appears to have been amplified by unusually wet weather in the South and Midwest as well as ongoing shortages of lumber and labor. Single-family starts tumbled 13.4% to a 1.087-million unit pace, with most of the drop in the South and Midwest. Demand for single-family homes, however, remains as strong as ever. The monthly NAHB/Wells Fargo Home Builders Index, which leads by a month, remained unchanged in May at 83, and the current sales conditions series held at 88, while prospective buyer traffic fell one point to 73. Both series remain near historic highs.

Building permits held up better than starts. Overall permits rose 0.3%, with all the gain coming from projects with five units or more. Apartment construction appears to be revving back up, as demand has improved across the country, including many of the hardest hit urban markets. Permits for single-family homes fell 3.8% in April to a 1.149 million-unit pace but remain 5.7% higher than starts, suggesting that April's dip in starts could prove short-lived. Moreover, both the number of single-family homes under construction and single-family homes completed rose in April.

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