Single-Family Housing Starts Make a Comeback

Home building in the U.S. picked up again in April after reaching the slowest pace in seven months, easing some of the previous concern surrounding the construction sector.

The U.S. Census Bureau and the HUD on Tuesday jointly released new residential construction statistics for April 2016. The report showed that privately-owned housing starts rose 6.6 percent from March's rate of 1,099,000 to 1,172,000 in April at a seasonally adjusted annual rate. However, year-over-year, housing starts are down 1.7 percent from last April's rate of 1,192,000.

Meanwhile, single-family housing starts were at a rate of 778,000 in April, up 3.3 percent from the March figure of 753,000, the Bureau and HUD reported.

"On a three-month moving average basis, single-family starts have been effectively flat since February, despite recent monthly volatility," said Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB). "NAHB expects growth in single-family construction in the months ahead, given ongoing strength in the labor market and favorable demographics. Consistent with this forecast, single-family permits are running 8.4 percent higher in April than a year prior."

"April usually sees a big increase in starts over March in the non-seasonally adjusted number as the weather is normally more hospitable to construction on site across the country," said Realtor.com Chief Economist Jonathan Smoke. "This year’s increase of 21 percent is less than last year’s 36 percent but otherwise is the strongest April increase in 20 years."

Brian Betzler, Regional Sales Manager for TD Bank (based in Florida) said in response to today's report, "Following a sharp slowdown in the first quarter, housing starts made a comeback in April. This rebound puts sales back on track for the ongoing recovery of the housing market.”

Privately-owned housing units authorized by building permits rose 3.6 percent from March's rate of 1,077,000 to a seasonally adjusted annual rate of 1,116,000 in April. However, building permits are down 5.3 percent year-over-year. Single-family authorizations in April were at a rate of 736,000, 1.5 percent above the revised March figure of 725,000. Authorizations of units in buildings with five units or more were at a rate of 348,000 in April, the report said.

According to the Bureau and HUD, privately-owned housing completions fell 11 percent from March's estimate of 1,048,000 to a seasonally adjusted annual rate of 933,000 in April. Completions are also down 7.4 percent from the April 2015 rate of 1,008,000. Single-family housing completions are down 3.6 percent from the revised March rate of 717,000 to 691,000 in April. The April rate for units in buildings with five units or more was 232,000.

"It remains highly likely that the less severe winter this year pulled forward more activity into February, leading to last month’s disappointing March. It is good to see that April reversed that temporary decline in total activity," Smoke said. "However, the declining year-over-year trend in multi-family construction looks to be real and reflects caution by developers to maintain the historically high level of apartment and condominium construction. Since household formation is outpacing completions, a lower level of multi-family new construction activity will keep vacancies low and will likely maintain above-average increases in rents."

The Collingwood Group Chairman Tim Rood identified a few warning signs associated with the homeownership rate in today's residential report.

“The homeownership rate now is around 63 percent—the lowest in 50 years," Rood said. “It will likely be at or near 60 percent in a year's time as the seriously delinquent population ends with a foreclosure or foreclosure alternative that results in a family no longer owning a home. That's a slippery slope. If we can't give first time homebuyers a shot at homeownership. When and/if the homeownership rate drops below 60 percent it could be a falling knife and create real pressure on home value.”

Click here to view the full report.