U.S. single-family homebuilding increased in April, but data for the prior month was revised sharply lower, suggesting that the housing market slump was far from over even as some segments show signs of stabilizing.
The rise in single-family housing starts last month reported by the Commerce Department on Wednesday was concentrated in the West, with the rest of the three regions reporting big declines. Shortages of some materials were likely hampering builders, with the homebuilding backlog surging and completions declining.
"We are far from a booming rebound in the housing sector," said Kathy Bostjancic, chief economist at Nationwide in New York.
Single-family housing starts, which account for the bulk of homebuilding, rose 1.6% to a seasonally adjusted annual rate of 846,000 units last month. Data for March was revised down to show single-family homebuilding falling to a rate of 833,000 units instead of increasing to a pace of 861,000 units as previously reported.
Homebuilding in the West surged 59.5%. Single-family starts dropped 10.3% in Northeast and tumbled 20.5% in the Midwest. They fell 6.1% in the densely populated South. Single-family housing starts plunged 28.1% on a year-on-year basis in April.
But single-family building permits rose 3.1% to a rate of 855,000 units in April, the highest level since last September. That aligns with an improvement in sentiment among homebuilders.
A survey on Tuesday showed the National Association of Home Builders/Wells Fargo Housing Market index increased in May to the midpoint mark of 50 for the first time since July 2022 as a dearth of previously owned homes supported new construction. Still, builders continued to face challenges, including shortages of transformers and other building materials.
The housing market has taken the biggest hit from the Federal Reserve's fastest monetary policy tightening campaign since the 1980s to tame inflation.
The average rate on the popular 30-year fixed mortgage has dropped from a peak of 7.08% in November. It averaged 6.35% last week, according to data from mortgage finance agency Freddie Mac. But tightening credit conditions could make it harder for builders to access funding for new projects.
Starts for housing projects with five units or more increased 5.2% to a rate of 542,000 units. Multi-family construction is being underpinned by demand for rental housing. But the rental vacancy rate rose to a two-year high in the first quarter, which could limit gains in construction.
With both single- and multi-family homebuilding rising, overall housing starts increased 2.2% to a rate of 1.401 million units in April. Economists polled by Reuters had forecast starts falling to a rate of 1.40 million units.
Permits for housing projects with five units or more dropped 9.7% to a rate of 502,000 units. Overall, building permits fell 1.5% to a rate of 1.416 million units.
The number of houses approved for construction that are yet to be started fell 1.0% to 290,000 units, the lowest level since last June. The single-family homebuilding backlog increased 4.5% to 139,000 units, while the completions rate for this segment dropped 6.5% to a rate of 971,000 units.
The inventory of single-family housing under construction fell 1.4% to a rate of 698,000 units. The stock of multi-family housing under construction increased 1.7% to 959,000 units.
"Given these weak numbers for new homes in the pipeline, and the extremely low level of existing homes for sale, the current weak state of the housing market looks to continue this year," said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia.
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