A new kind of recession!!
Residential construction remains sturdy, with the number of housing starts increasing to 1.61 million in April from March, representing a 1% increase. One a year-over-year basis however, construction is slightly weaker, with starts 1% down from last year.
Starts of single-family units are boosting overall starts, with an increase of nearly 7% from March. Builders are responding to sturdy demand for homes that boosted sales of new homes to a new record in April.
Multifamily starts are down to 321,000 units, slightly below the average of 341,000 units so far this year. In the context of the past 18 months, April’s reading is on the weak side.
While construction activity is not as strong as a year ago, it continues to exceed expectations. Housing starts increased in April from March at a stronger pace than anticipated on strength of single-family construction. Multifamily starts declined slightly, after advancing for the last three months.
Strong demand for homes, as indicated by April’s record high number of new home sales, is driving the sturdy building activity in the single-family market. Even with a slight uptick in the rate on a 30-year fixed mortgage, housing affordability remains high enough to offset the negative influences of a weakening labor market, a plunge in consumer confidence and a faltering stock market. Additionally, more households are switching to adjustable rate mortgages, which remain below 6%.
Moreover, there is reason to believe that the pace of building may pick up. Homebuilders are becoming more optimistic, with the NAHB’s index of builder expectations for home sales in the next six months rising, as are mortgage applications for purchases. However, the risks are still largely on the downside for builders. If the labor market continues to deteriorate as rapidly as it did in April, the pullback in housing demand will be sharp.
This month’s housing starts numbers should help ease policymakers’ fears that the interest rate cuts to date have been ineffective. |
