Home Construction Stalled in April

May 20, 2020

Construction of new homes saw a large decrease in activity last month, as the COVID-19 pandemic spurred social distancing protocols and stay-at-home orders. But builders are optimistic that a turnaround is near.

Total housing starts plunged by 30% in April to a seasonally adjusted rate of 891,000 units, the departments of Housing and Urban Development and Commerce reported Tuesday.

Broken out, construction on single-family homes decreased 25% to a 650,000 seasonally adjusted annual rate, which is the lowest single-family starts rate since the first quarter of 2015. The multifamily sector saw construction activity fall by 40.5% to a 241,000 pace.

“Despite today’s numbers, there is an undercurrent of long-term positivity in the housing market that will allow for a strong rebound,” says Dean Mon, chairman of the National Association of Home Builders. “Our builder confidence index has already shown signs of a turnaround. Housing was showing signs of momentum before the pandemic and is poised to lead the economic recovery as virus mitigation efforts take hold and more states take gradual steps to reopen.”

Some regions faced larger declines than others last month in construction activity. Single-family starts saw the largest declines in the West and Northeast in April, as large metro areas in these regions faced some of the highest number of coronavirus cases in the nation.

“While the April numbers were down, they were somewhat better than forecast and are expected to improve as more of the economy reopens,” says Robert Dietz, the NAHB’s chief economist. On a year-to-date basis, single-family starts did still eke out a 1% increase.

However, new housing activity will likely continue to face headwinds in the months ahead. Housing permits, a gauge of future homebuilding activity, declined 20.8% to a 1.07 million annualized rate in April. Broken out, single-family permits fell 24.3% to a 669,000 unit rate while multifamily permits dropped 14.2% to a pace of 405,000.

Some regions saw building permits fare better than others last month. For example, construction permits moved 7.1% higher in the South on a year-to-date basis and 14.1% higher in the West. On the other hand, permits were down 8% annually in the Northeast and by 3.1% in the Midwest.