Construction Cools as Costs Climb

Economics
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Housing production fell in April due to the increased costs of building materials that have priced out potential home buyers. Overall housing starts decreased 9.5 percent to a seasonally adjusted annual rate of 1.57 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The April reading of 1.57 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 13.4 percent to a 1.09 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 0.8 percent to a 482,000 pace.

“Housing starts and permits posted a monthly decline in April, as escalating prices for lumber and other building materials price out some home buyers from an otherwise hot housing market,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Fla. “Policymakers need to prioritize the U.S. supply chain for items like building materials to ensure builders can add the additional inventory the housing market desperately needs.”

“The decline in single-family permits indicates that builders are slowing construction activity as costs rise,” said NAHB Chief Economist Robert Dietz. “While housing starts were strong at the beginning of the year, due to home builders constructing homes that were sold pre-construction, higher costs and limited availability of building materials have now paused some projects.”

Overall permits increased 0.3 percent to a 1.76 million unit annualized rate in April. Single-family permits decreased 3.8 percent to a 1.15 million unit rate. Multifamily permits increased 8.9 percent to a 611,000 pace.

Looking at regional permit data compared to the previous month, permits are 8.4 percent higher in the Northeast, 9.9 percent lower in the Midwest, 3.9 percent higher in the South and 4.1 percent lower in the West.

The number of single-family homes permitted but not started construction continued to increase in April, rising to 131,000 units. This is 47 percent higher than a year ago, as building material cost increases and delays slow some home building.