New-Home Construction Falls After Reaching 5-Year High

May 20, 2013

Construction on new homes posted a 16.5 percent drop in April after reaching a nearly five-year high the previous month, the Commerce Department reports. 

The National Association of Home Builders called the dip in April a “correction from an unsustainably high level of production on the volatile multifamily side.”

“The big decline in April housing production was mostly on the multifamily side, which recorded a similarly dramatic increase in the previous month,” says NAHB Chief Economist David Crowe. 

But Crowe says the dip in building activity will likely be temporary. Housing permits—a gauge of future homebuilding—rose 14.3 percent in April over the previous month. It’s at its highest level since June 2008. Broken out, permits for single-family housing construction rose 3 percent in April, and soared 37.5 percent in the multifamily sector.

Regionally, housing starts for both single-family and multifamily construction in April rose 10.9 percent in the Midwest, but fell 27.9 percent in the South, 12.8 percent in the Northeast, and 6.2 percent in the West. However, the Midwest, South, and West all posted double-digit gains in housing permits for future construction. 

“While builders today are considerably more optimistic than they have been at earlier stages of the housing recovery, numerous challenges are slowing their ability to get new projects underway,” says Rick Judson, NAHB chairman. “In particular, limited access to construction credit, tough qualification standards for mortgage borrowers, and rising costs for building materials, developable lots and labor are impacting the pace of construction activity.”

Source: National Association of Home Builders and “April housing starts plummet from almost 5-year high,” Reuters (May 16, 2013)