Housing starts exceeded one million for first time since last year and housing permits were over one million for a third consecutive month. The increases were almost entirely in multifamily rental construction.
Multifamily construction soared 40% to 423,000 starts, the highest since January 2006 and permits also rose 20% to 478,000, the highest in almost six years. Multifamily starts were particularly strong in the Midwest where they more than doubled from an unusually low 42,000 to 100,000.
Single-family starts increased 5,000 (on a seasonally-adjusted annual basis) to 649,000 from an upwardly revised March that was 635,000. Single-family permits rose 2,000 but also from an upwardly revised March that was 592,000. Single-family starts were unchanged in the Northeast and down 2.6% in the South while rising 5.5% in the Midwest and 5.8% in the West.
The rise in multifamily is indicative of the continued demand for rental apartments by young, newly-formed households. Most of those households are renting rather than the normal trend of a quarter buying a first home. In addition, most new homes are sold to trade up buyers and those present home owners are hesitant to sell for several reasons. They refinanced into a low rate mortgage and don’t want to give it up. They have yet to see sufficient equity build up even with rising home prices to feel comfortable selling and buying. They can’t qualify for a mortgage. Or, they still have concerns about their own financial future.
Until the uncertainties of selling a current home are clarified and until economic growth is more consistent and sufficient, current home owners will not move and new home sales will continue their weak recovery. The underlying economic expectations are positive as most of the clouds of the recession dissipate. NAHB expects 2014 to see a pick up and new home sales and starts to perform better in the second half.