Gauges of new-home construction showed signs of a slowing housing market, according to preliminary data released Wednesday—but not every part of the market appears to have slumped.
Building permits in April fell 3.2% from March to a seasonally adjusted annual rate of 1.82 million, according to the Census Bureau and Department of Housing and Urban Development’s new residential construction report. Housing starts, meanwhile, fell 0.2% from March to a seasonally adjusted annual rate of about 1.72 million. However, with such a small change, the Census Bureau noted that “there is insufficient statistical evidence to conclude that the actual change is different from zero.” Consensus estimates expected both metrics to drop.
Rates for building permits in March were revised higher, while those for housing starts were revised lower.
Despite the month-over-month declines, both metrics were higher than a year ago. Housing starts were 14.6% higher than the same month in 2021, while permits were up 3.1% year over year.
Investors and economists watch the government’s measures of housing starts—the commencement of construction on a new home—and building permits—a gauge of authorizations granted for new-home construction—for signs of housing market strength or weakness.
Housing starts overall “are holding up surprisingly well in the face of sharply higher mortgage rates,” wrote Jefferies economists Aneta Markowska and Thomas Simons in a Wednesday note—but such strength wasn’t equally distributed across housing types. “Multifamily building has taken off just as demand for single-family homes is beginning to crack,” the economists wrote.
In April, one-unit starts fell 7.3% month over month, while starts with five or more units rose 16.8%. While permits fell across housing types, authorizations for residences with five or more units showed the smallest decline, slipping 0.6% month over month compared with a 4.6% decline in one-unit permits.
The release comes on the heels of a lower-than-expected measure of builder confidence released Tuesday. The National Association of Home Builders Housing Market Index, which gauges builders’ view of the market for new single-family homes, fell eight points in May to its lowest level since June 2020.
“Today’s housing starts report is more evidence that the single-family market is slowing,” Robert Dietz, the trade group’s chief economist, said in a Wednesday release. He said he expects single-family starts to be flat in 2022 and fall in 2023 due to higher mortgage rates and construction costs.
Write to Shaina Mishkin at [email protected]