According to estimates from the U.S. Housing and Urban Development and Commerce Department, single-family and multifamily starts improved in April, consistent with the recent stabilization of the NAHB/Wells Fargo Housing Market Index (HMI). Single-family starts increased 6.2% to an 854,000 seasonally adjusted annual pace in April. Total multifamily starts increased 4.7% to a 381,000 annualized rate.
On a year-to-date basis, single-family construction is 4.5% lower than the first four months of 2018. NAHB’s forecast, and the forward-looking HMI suggest that future data will show stabilization followed by slight gains due to recent declines in mortgage interest rates. However, single-family permits continued to be soft in March, declining again in April. Single-family permits were down 4.2% in April, falling to a 782,000 annual rate, the lowest since October 2016.
On a regional and year-to-date basis, single-family starts are down 13.5% in the housing affordability challenged West, 6.4% in the Midwest, and 0.5% in the South. Single-family starts are up on a year-to-date basis 1.7% in the Northeast. Preliminary NAHB analysis (due out in two weeks) indicates that for the first quarter, net single-family permit increases were only registered in more affordable exurban markets of the U.S.
Multifamily starts increased 4.7% in April to a 381,000 annual rate. The NAHB forecast calls for slight gains in multifamily production as the year progress. In fact, multifamily permits increased 8.9% in April to a 514,000 annual rate, the highest since March 2018. We expect continued expansion of apartment construction outside of large urban core areas, expanding into suburban locations.
Recent construction softness is clear in the current estimates of housing units under production. As of April 2019, there were 525,000 single-family homes under construction. While this is 1.7% higher than a year ago, it is down from the 545,00 peak count from January 2019. Similarly, there are currently 596,000 apartments under construction, which is more than 2% lower than a year ago and down from the peak count of 623,000 in February 2017. The combination of these declines in current construction activity are seen clearly in the graph below, with declines for total housing under construction for all of 2019. This is responsible for a slight decline in housing’s share of GDP.