New-home construction declined in April as fewer starts of apartment projects outweighed a modest improvement in single-family structures, government figures showed Wednesday.
Residential starts fell 3.7% to a 1.29 million annualized rate (the estimate was 1.31 million) after a revised 1.34 million pace in the prior month. Multifamily home starts slumped 11.3% after a 13.6% March increase, while single-family rose 0.1%. Permits, a proxy for future construction of all types of homes, fell 1.8% to a 1.35 million rate (matching the estimate). The report included revisions to housing starts dating back to 2013 and building permits to 2012.
Stable single-family starts and an increase in the number of homes authorized but not yet started underscore a pace of residential construction that will probably support economic growth as homebuilders remain upbeat about the market’s progress.
Builder optimism has its roots in solid sales that are being bolstered by resilient hiring and larger take-home pay following federal government tax cuts.
While demand and homebuilding remain solid, the industry is not without its challenges. Construction companies cite a shortage of workers, rising costs for lumber and other building materials and a scarcity of available lots on which to start new projects. Affordability is also becoming a bigger issue as gains in property values outpace income growth and interest rates rise.
The report showed 163,000 homes were authorized for construction in April but not yet started, up 14% from 143,000 a year ago and indicating a steady pace of homebuilding in coming months.
Three of four regions posted declines in starts, led by a 16.3% decrease in the Midwest and a 12% drop in the West. Construction climbed 6.4% in the South, reflecting the fastest pace of single-family starts since July 2007. The report was released jointly by the Census Bureau and Department of Housing and Urban Development in Washington.